The much-awaited and highly anticipated Union Budget of India for the year 2021-22 is finally out. While it has brought joy to some sectors, there has been a wave of disappointment in others. For the real estate sector too, this year’s annual budget has brought with itself a bag full of mixed goodies.
Though the Finance Minister Nirmala Sitharaman has made a number of future-forward announcements in the real estate sector, especially for the affordable housing segment, the Union Budget 2021 has not been able to meet the needs and demands of high-end luxury buyers, leaving both the investors and the developers a little disappointed.
So, has the Union Budget 2021 been good or bad for the real estate sector? Will it boost the demand and supply of residential properties in India? Let’s take a look.
The Hits – Rebates and reforms to boost real estate growth
Well, with some hearty announcements, this year’s Union Budget is surely going to help the real estate industry in a number of ways:
- Rebates to help real estate developers meet the growing demands for affordable houses
Staying in line with Government’s objective to provide affordable houses to everyone, the Government has furthered the interest deduction of Rs 1.5 lakh on home loans taken for the purchase of affordable residential units for the entire next financial year, i.e. 2021-2022. This will help intensify the demand of residential houses in the affordable housing segment and will help the Government fulfil its objective of providing “Housing for All”.
The two biggest incentives given to the real estate sector in the Union Budget 2021-22 include a substantial tax relief for the purchase of affordable houses and the allowance for the participation of private investments into the debts of REITs and InvITs.
- Tax benefits to promote the affordable rental housing supply in urban cities
Addressing the critical problem of migrant workers and the urban poor, the FinMin offered to provide a significant tax exemption for all the ‘Affordable Rental Housing Projects’. This will help promote the affordable rental housing supply in India and will help our migrant workforce make an affordable living in urban cities and recover from their financial hardships caused due to COVID-19 pandemic.
- Stimuli to provide a steady boost to the infrastructure sector
To boost the growth and development of the infrastructure sector in India, Finance Minister Nirmala Sitharaman has provided a recompensing stimulus to the REITs and InvITs through TDS exception. She has also permitted the entry of international portfolio buyers to invest into the debts of REITs and InvITs. This will not only help increase the sources of capital for REITs and InvITs but will also boost the growth of real estate and infrastructure sector in India.
The Misses – Realty demands that Budget 2021 failed to address
While the aforementioned initiatives will help propel the growth and development of the real estate sector in India and will boost the sale of residential properties in Pune, Bangalore, Mumbai, Delhi and other urban cities, there were some long-running hopes and demands of the realty developers that the Government has kept outside this year’s Union Budget’s ambit. These include:
- Imparting the real estate sector an ‘industry’ status
Getting an industry status has been one of the long-term hopes of the real estate sector, and something that the leaders expected from this budget too, especially due to the pandemic-inflicted setbacks that the realty sector has to face. A move in this direction would have helped the builders and developers to:
- Procure loans at lower interest rates
- Attract equity investment
- Get their debts refinanced
But the FinMin showed no hope in this arena, at least for some time as of now.
- The re-introduction of the Input Tax Credit and other GST reforms
The developers were in need of some crucial measures that would have helped them deliver their stalled projects well within the promised deadlines. These included single-window clearance, easy loans/re-financing from banks, Input Tax Credit (ITC), and a single GST rate for both affordable and non-affordable segments – something that has not been considered during the formation of Union Budget 2021-22.
- The introduction of liquidity easing measures
The developers were long hoping that the upcoming Union budget would announce the introduction of various liquidity-easing measures like rational capital provide, entry to funds, and longer compensation cycles for incomplete projects to help boost the growth of the sector. But these points remained completely untouched during the Budget 2021-22 announcement.
Conclusion
Though the Union Budget 2021-22 failed to meet all the demands and hopes of the real estate sector, the announcements made will definitely help strengthen the realty sector in more ways than one. The experts are hopeful that just like certain state governments who have introduced various innovative SOPs for the real estate industry like cutting down stamp duty charges and construction premium, the government too would announce further stimulus measures in the near future to help real estate sector bounce back from the COVID-19 setbacks.
