Budget 2017: the good, the bad and the ugly

Now that the Union Budget for 2017 has been published, what does it mean for real estate? As a first time buyer, should you invest in a luxury apartment? As a homeowner, should you keep it or sell it? With this article we delve into the pros and cons of budgeting.

1. Reduction of the holding period

Investors and homeowners have strong reasons to join the 2017-18 budget. But first, a little backstory. Short-term capital gains are taxed at 30 percent, while for long-term capital assets it is 20 percent. Under the latest policy, the holding period for long-term assets, such as apartments and houses, has been reduced to two years from three years. This means that homeowners can now resell their properties within two years of their acquisition and enjoy a reduced tax burden of 20 percent. This could result in more people disposing of their homes, leading to an increase in supply versus demand, which is favorable to buyers. The new budget aims to reactivate the real estate sector by facilitating mobility and ownership of assets.

2. Grant infrastructure status

The Finance Minister has proposed offering affordable housing sectors with an ‘infrastructure status’. To qualify, homes must exhibit a carpet area of ​​30 square meters. and 60 m2, instead of a built-up area. If you’ve been waiting to buy a luxury apartment, now would be a good time to get your investment back. As for builders, having ‘infrastructure status’ will mean cheaper loans and better tax breaks. These benefits will trickle down to first-time buyers who can purchase more affordable homes. This is a significant step towards achieving the ‘Housing for All’ mission.

3. Base year, redefined

The new budget has set the base year for indexing long-term assets, including land and buildings, at 2001 instead of 1981. This is good news for buyers. How? Previously, despite paying more for a property purchase, tax benefits could only be redeemed at recorded rates that were much lower than market value. However, with this measure, those looking to invest in property can now enjoy greater tax benefits.

4. Notional income

The tax will now apply to builders for unsold floors after one year of construction. Previously treated as commercial stock, the same will no longer apply to vacant or unsold apartments. Since only one home is maintained for self-occupancy, unsold units will be considered rented and the corresponding tax must be paid by the developer. In an attempt to make up for such incidents, developers may try to get rid of those expensive luxury apartments as soon as possible, leaving buyers with a promising offer.