Union Budget 2023 for the Real Estate Sector

Union Budget 2023 for the Real Estate Sector

In her Budget presentation today, Union Finance Minister Nirmala Sitharaman announced various infrastructure and real estate-focused plans that she said would improve the nation.

“The government is committed to improving India’s infrastructure and real estate sector,” she said. “We have created various plans that will help us achieve this goal.”

1. FM increased the PM Awas Yojana budget by 66%, bringing it to over ‘79,000 crore.

2. In addition, to encourage the growth of residential property investment, the Finance Ministry has recommended capping the deductions from capital gains under Sections 54 and 54F at ₹10 crore. To ensure fairness, the income tax exemption from the proceeds of highly valuable insurance policies should also be limited.

3. The Financial Minister (FM) has proposed a change to the guidelines for calculating capital gains in cases of joint property development. Under the new rules, money received in the form of a cheque or other form of payment will be taken into account when calculating capital gains. This change will ensure that all payments made in accordance with the joint property development are properly taken into account and reflected in the capital gains calculation.

4. Union Finance Minister, Nirmala Sitharaman, has announced a new policy to reduce capital gains on property transfers. She said, “Interest paid on borrowed capital for acquiring or improving a property can be claimed as a deduction from income and can also be included in the cost of acquisition or improvement on transfer. This will significantly reduce the capital gains incurred when transferring the property. Furthermore, the cost of acquisition or improvement shall not include the amount of interest claimed earlier as a deduction.” With this new policy, property owners can now benefit from lower capital gains when transferring their property.

5. FM has proposed to modify the rules for calculating capital gains in cases of joint property development to include money paid by cheque or other forms of payment as consideration. This change would help ensure that individuals who invest in joint property development receive the full value of their investment, while avoiding any potential tax liabilities.

6. Cities looking to boost their creditworthiness for municipal bonds can do so by taking advantage of ring-fenced user charges on urban infrastructure and implementing property tax governance reforms. These measures will lead to increased financial stability, allowing cities to issue bonds with greater confidence and attract more investors. By utilizing these strategies, cities can ensure their bond ratings remain strong and their financial future remains secure.

7. The Government of India has announced the establishment of a new Urban Infrastructure Development Fund (UIDF) through the use of priority sector lending shortfall. This fund, managed by the National Housing Bank, will be dedicated to creating urban infrastructure in Tier 2 and Tier 3 cities across India. States will be encouraged to leverage resources from the grants of the 15th Finance Commission, as well as existing schemes, to implement appropriate user charges while accessing the UIDF. To ensure that this fund is able to deliver its intended purpose, an estimated ₹10,000 crore per annum is expected to be made available for this purpose. This fund will be implemented alongside the previously announced Rural Infrastructure Development Fund (RIDF).

8. The newly established Infrastructure Finance Secretariat will assist all stakeholders in facilitating more private investment in infrastructure, including railways, roads, urban infrastructure and power, which are traditionally dependent on public resources, said the Finance Minister. The Secretariat will provide guidance on the most effective ways to attract private capital and create a more attractive and reliable environment for investors, while also promoting greater engagement with the public sector and wider civil society. This will help to ensure that the benefits of infrastructure development are shared widely and that infrastructure projects are implemented efficiently and sustainably.

9. The Government of India will be encouraging states and cities to take the necessary steps to transform their cities into ‘sustainable cities of tomorrow’. By implementing urban planning reforms and actions, cities can ensure efficient use of land resources, adequate resources for urban infrastructure, transit-oriented development, enhanced availability and affordability of urban land, and opportunities for all. This will create a future of greater economic stability, improved quality of life, and a more equitable society for all citizens. Finance Minister (FM) has outlined these steps to create a brighter and more sustainable future for our cities.

10. The Finance Minister has proposed to provide exemption from any income arising to a body, authority, board, trust, or commission (not being a company) which has been established or constituted by or under a Central or State Act, for the purposes of satisfying the need for housing or for planning, development or improvement of cities, towns and villages or for regulating any activity or matter, irrespective of whether it is carrying out commercial activity. This exemption will be available to all such bodies irrespective of their size, scope or purpose.

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