Budget 2021: Realty Sector Gets Boosted

Union Budget 2021-22

The outbreak of coronavirus has dealt a major blow to the real estate sector. Stalled projects are a major problem for the region. Budget 2021 presented by Finance Minister Nirmala Sitharaman has given some relief to both buyers and builders. During the budget, it announced an increase in the cut on affordable housing to one year to FY22. Tax exemptions for rental residential projects were also notified. In addition, the government stated that it is committed to providing affordable rental housing for migrant workers.

Affordable housing, tax cuts on home loan interest, debt financing for REITs and INVITs, and boosting infrastructure in the Union Budget 2021-22 are expected to be the biggest gains for the real estate sector in India.

Boost To Affordable Housing

Presenting the budget, FM Nirmala Sitharaman said the government saw “Housing for All” and “Affordable Housing” as preference areas. He has cut an additional Rs 1.5 lakh on the loan taken to buy an affordable home. It also proposes to continue the eligibility for this deduction till March 31, 2022, for another year. An additional deduction of Rs 1.5 lakh will be available for the purchase of an affordable house by 31 March 2022.

Besides this, she also announced that to ensure the supply of affordable houses, projects in this sector can avail a tax holiday for one more year i.e. till March 31, 2022.

The measure has been acknowledged by real estate developers, particularly those who focus on supplying affordable housing. In all, the Ministry of Housing and Urban Affairs has been allocated Rs 54,581 crore in Budget 2021.

Boost To Infrastructure

FM Nirmala Sitharaman proposed ‘MetroLite’ and ‘MetroNeto’ to provide a metro rail system at low cost with equal experience, convenience, and security in Tier-2 cities and peripheral areas of Tier-1 cities.

• Under Budget 2021, the Centre will grant funding to:
• Kochi Metro Rail Project (KMRP) Phase-II of 11.5 km at a cost of Rs 1,957.05 crore
• 118.9 km Chennai Metro Rail Project (CMRP) Phase-II at a cost of Rs 63,246 crore
• 58.19 km Bangalore Metro Railway Project Phase 2A and 2B at a cost of Rs 14,788 crore
• Nagpur Metro Rail Project (NMRP) Phase-2 and Nashik Metro at a cost of Rs 5,976 crore and Rs 2,092 crore respectively.

It has raised Rs 20,000 crore to capitalize on a professionally managed Development Financial Institution, which is required to act as a provider, enabler, and catalyst for infrastructure financing. For ambition, this DFI should have a lending portfolio of at least Rs 5 lakh crore in 3 years.

Nirmala Sitharaman announced around 217 projects worth more than Rs 1 lakh crore under the National Infrastructure Pipeline, which she announced in December 2019, the first of its kind, all-government exercise undertaken by the government. India. NIP was started with 6,835 projects; The project program has now expanded to 7,400 projects.

Experts believe that encouraging infrastructure will give the realty sector a weight.

Win-Win For Construction Workers

The Budget 2021 also had some provisions for construction workers. FM Nirmala Sitharaman proposes to launch a portal that will collect relevant information about the gig, building construction, and construction workers, among others. This will help in formulating health, housing, skills, insurance, loans, and food schemes for migrant workers.

This year’s budget has been unique in terms of NHAI’s highest allocation of Rs 1,18,101 crore. Shee has given an increased outlay of Rs 1,18,101 lakh crore to the Ministry of Road Transport and Highways, out of which Rs 1,08,230 crore is for capital, the highest ever.

This expanded support to boost the infrastructure indirectly will enhance the tourism sector with better connectivity, it will increase job opportunities in the infrastructure sector which will improve the employment conditions for the workers.

Real Estate Infrastructure Trusts (REITs)

In the previous budget, the government ended the Dividend Distribution Tax (DDT) to boost investment. The dividend was made taxable through shareholders. Now, to give ease of compliance, the Finance Minister has proposed exemption from TDS / dividend payment to REITs.

Further, since the amount of dividend income cannot be computed correctly by the shareholders to pay the advance tax, the Minister proposed to provide advance tax liability on the dividend income/declaration will arise only after payment. In addition, for foreign portfolio investors, FM proposed allowing a tax deduction on dividend income at a lower agreement rate.

With this, real estate experts hope that equity capital will be amicable to increase.

Boost To Stressed Asset

The high level of provision of stressed assets by public sector banks calls for measures to clean the bank books. An Asset Reconstruction Company and Asset Management Company will be established to consolidate the existing stressed debt and then manage and dispose of assets to Alternative Investment Funds and other potential investors.

To assure speedy resolution of cases, the NCLT frame will be strengthened, an e-court system will be implemented and alternative methods of debt resolution and special framework for MSMEs will be added.

Unnoticed Realty Sector

However, there were some misses in the budget for the real estate sector as well and expectations that have not been met. Developers were hoping for industry status to be provided to the real estate sector and were also hoping for Input-Tax Credit benefit and measures.

Experts View on Budget 2021

The increase in the time limit for affordable housing projects deduction and additional interest on loans borrowed for affordable housing will compensate for the time lost due to the pandemic, said Divakar Vijayasarathy, Founder & Managing Partner, DVS Advisors LLP

The increased focus on infrastructure growth and capital expenditure will impact the overall growth of the real estate sector too, said,” Ankush Kaul, President – Sales & Marketing – Ambience Group said.

“A good infrastructure could propel the development of real estate, both commercial and housing, along the transit corridors, highways, and newly-proposed airports,” he added.

There were no specific announcements to boost the ailing real estate sector in the Budget 2021. The sector needs to be nurtured in-toto for its contribution to GDP specifically, but more importantly, for being a necessary input in all economic activities, said Sankey Prasad, Chairman & MD, Colliers International India.

“The developers needed measures that can help them in developing projects on time such as help in loans from banks, single-window clearance, ITC benefit, etc. These topics were not touched upon by the finance minister and we expect that the government will take care of these soon. The minister has announced measures that might streamline funds. The real estate sector needs financing for incomplete viable projects, and we hope that banks will extend help to the realty sector,” said Achal Raina, COO, Raheja Developers.

“Long pending demand of the real estate sector has not been met. We have been asking for industry status for the whole sector and single-window clearance for smooth functioning, the government did not comment on these requirements. Overall, the budget announcements made by the finance minister seems to be a mixed bag from the real estate perspective,” said Harvinder Singh Sikka, MD, Sikka Group.

Conclusion

While the economy will benefit from the various schemes proposed, which will definitely affect real estate, the proposals also mark the shift from ‘survival’ to ‘development’. No direct taxation is one of the key aspects that make it positive for an economy struggling with the effects of the Covid-19 epidemic. The incremental budget plays an important role not only in economic recovery from an epidemic crisis but also empowers the development of the Indian economy to achieve the $ 5 trillion level.