Budget 2019: Infra, real estate the top gainers

This budget coming just ahead of three months from the general election has grabbed many eye balls and mind space. Though this is not an actual budget and also throws an eye on the upcoming election has still achieved a decent balance. A well thought out and practical statement from the government addressing some of the key issues while overall boosting the growth prospects of the economy.

Especially, the farm sector which dearly needs a fillip is well rewarded and compensated. The low inflation has adversely affected the agricultural income and the various steps taken to address this community is welcome. The budgeted outflow of about Rs 75,000 crore with the introduction of Income Support Scheme for marginal farmers is a great respite. There’s been an overall allocation jump of about 30 per cent with significant growth to Direct Benefit Transfer and Swastya Bima Yojana.

While there has been a loud chorus for the farm loan waiver in the past few months, the government has remained wise and hasn’t taken the populist stance which could add further burden on the fiscal prudence and the banking system. The introduction of incentive of three per cent for prompt repayment on the entire period of reschedulement is a desired move.

Another key area is addressing the middle class especially, the salaried class. With the introduction of Long-Term Capital Gains Tax (LTCG) in the last fiscal and nothing exciting, there was a backlash for this segment of people. The government has not only acknowledged but recognised the honest tax payer and went ahead to incentivise them. Now, the interim Finance minister (FM) seems to have handled this cleverly with increasing the threshold of income tax exemption to Rs 5 lakh with an impact of savings of Rs 18,500 in a year. Though, this wasn’t a blanket exemption, it still benefits about three crore tax payers (about half of the entire tax payers).

Also, increasing the standard deduction to Rs 50,000 is another saving for the employees which has a gross impact of Rs 4,700 crore to the exchequer. Another relief, particularly, pleasing the senior citizens is the measure to increase the threshold of Tax Deduction at Source (TDS) on the interest earned from bank/postal deposits.

While the earlier reforms of GST and RERA have debilitated the Real Estate sector in the short-term, the budget also paid heed to their concerns. The no-tax on notional rental income from the second self-occupied house is a clear positive. While continuing their ‘housing for all’ goal, the government has extended the tax benefits for one more year for affordable housing projects.

Also, for the developers, the centre has exempted from paying notional tax on the unsold inventory for a period of 2 years from one. More importantly, the capital gains from the sale of one house could now be channeled up to two houses is a clear boost for housing purchases.

The budget in general was a big positive to the consumption story, it has remained almost mute on the subsidies thanks to the lower oil prices, plugging leakages due to linking of Aadhaar to the welfare schemes. This was being done while the tax base was gradually being expanded. Though, this is an annual event, the key takeaways for investing is the complete establishment of equities as an important asset class.

Despite an immediate event of election is scheduled, the long-term prospects remain attractive for investors. Even though a slight increase in the fiscal deficit, the FM has successfully managed a rope-walk across with ease. The sectors that would gain are infrastructure, real estate and banking and financial services while most of the other sectors remain unaffected.

(The author is a co-founder of “Wealocity”, a wealth management firm, and could be reached at knk@wealocity.com)