Real estate research firm Liases Foras MD: Budget 2023 covers most sectors, has something for all

Union Finance Minister Nirmala Sitharaman on Wednesday presented the Union Budget for 2023-24 (Apr-Mar) in the Lok Sabha. Team FPJ spoke to industry experts from various fields. To gauge the reaction in the field of real-estate we spoke with Pankaj Kapoor, the Founder and Managing Director of real estate research company Liases Foras. Here's what he had to say.

Pankaj Kapoor said the Budget 2023-24 has covered the maximum possible sectors while trying to keep the fiscal deficit in check. Few would complain, and most of the industry and consumers appeared to have welcomed the budget. The positivity in the stock markets also reflects this general sentiment.

MSMEs benefit

The budget is highlighted by enhanced capital expenditure, tax benefits in the new tax regime, and the highest-ever outlay on railways. Micro, Small and Medium Enterprises (MSMEs) would rejoice at additional investment in the Credit Guarantee Scheme. 

Most sectors were considered, including agriculture, auto, tourism, and healthcare, while prioritizing infrastructure, energy, innovation, and employment. Tax slab enhancement and reduction in the highest rate of surcharge would bring cheer to both lower and higher-end earners. Overall, the bill has tried to keep something in it for everyone with minimal exceptions.

From an investment perspective, the government appears to phase out the old tax regime by minimising the impact of tax-saving investments. The government is not too keen on pushing investments in savings, insurance, and other earlier tax saving investments (covered under Section 80 and different claimable sections). There was a time when taxpayers would rush towards such investments, especially during the financial year's end, with the sole purpose of saving tax. 

This will also impact housing as tax-saving incentives would no longer be a consideration in purchasing a house, in lower income groups, especially in the affordable housing sector. The enhanced benefits of interest on housing loans over and above the limit allowed under section 80C was a decisive factor for lower-income tax groups. They would attempt to structure their loans over longer periods for the maximum tax benefit, all of which is now becoming redundant. This would influence all concerned to rethink their long-term investment plans. On the other hand, the tax benefit for rent paid would also be lost, which may push individuals to move towards owned housing, however, the income and EMI considerations now vary significantly. People may opt for shorter period loans.

Capital gains

The capital gain change would have an impact much more significant than the small mention it earned in the Finance Minister's speech. Capital gains were earlier allowed to be invested under the Income Tax section 54 without any monetary limit. This has now been changed, limiting the investment amount to Rs10 crore. So, any capital gain above Rs10 crore would be automatically taxed. While this amount would appear large in terms of capital gain for a middle or even slightly higher middle-class person, it would have a significant impact on real estate transactions of high magnitude, especially those involving corporates, high value and luxury properties, and commercial and land deals. Parties concerned may consider masking the overall profits through other means, such as understatement of proceeds or using other means of sales consideration. If the volume of such transactions is large, it may give rise to parallel means of exchange by unscrupulous people in business.