The Covid-19 pandemic deeply affected the realty sector and all its stakeholders last year. However, the Union Budget 2021-22 has raised the hopes of the industry. Experts believe that the Budget would provide an excellent opportunity for the industry to recover. Developers and buyers alike hope that changes, such as tax cuts and price correction, will help stabilise the industry. 

In order to revive an ailing real estate sector amid a global pandemic, finance minister Nirmala Sitharaman has announced several encouraging measures in Union Budget 2021-22. Presenting the Budget proposal, Sitharaman stated that in this financial year, the government sees “Housing for All” and affordable housing as priority areas. A total of Rs 54,581 crore was allocated by the Ministry of Housing and Urban Affairs in Budget 2021-22. 

Let's have a look at the benefits for real estate.

Key Benefits of Union Budget 2021-22 for Real Estate

Affordable Housing

Boosting growth and consumption, Sitharaman extended the tax exemption for affordable housing for a year. The central government offered an additional income tax deduction of up to Rs 1.5 lakh for home loans in the July 2019 Budget. The eligibility for this tax deduction was extended until 31st March 2022 by Sitharaman.

Also, a one-year extension of the tax holiday for affordable rental housing projects was proposed to ensure affordable housing for migrant workers. This will help to bring in new supplies within this segment and will keep affordable housing demand buoyant in 2021.

REIT

Foreign Portfolio Investors' Debt Funding of InVITs and REITs will be made possible by making necessary changes to the current regulations. This would also promote access to InVITS and REITs for funding, thus increasing funds for the infrastructure and real estate sectors.

In order to boost investment, the government scrapped the Dividend Distribution Tax (DDT) in the previous Budget. In the hands of shareholders, dividends have been made taxable. FM has now recommended that the dividend payment to REIT/InvIT be removed from TDS in order to provide ease of compliance.

Furthermore, because the amount of dividend income cannot be accurately determined by the shareholders in order to pay the advance tax, FM suggested that the advance tax liability on the dividend income should only occur after the dividend declaration/payment has been made. For Foreign Portfolio Investors, FM also suggested allowing dividend income tax deductions at a low treaty rate.

Infrastructure Boost

A total of 702km of conventional Metro is in service and an additional 1,016km of Metro and RRTS would be installed in 27 cities. Two new technologies, i.e. 'MetroLite' and 'MetroNeo', will be implemented in Tier-2 cities and peripheral areas of Tier-1 cities to provide Metro rail systems at a much lower cost with the same experience, comfort and safety.

Infrastructure requires debt funding in the long term. To operate as a provider, enabler and catalyst for infrastructure funding, a professionally managed Development Financial Institution is required. FM would, therefore, introduce a Bill to create a DFI. To leverage on this institution, Sitharaman has allocated a total of Rs 20,000 crore. The goal is to have a loan portfolio for this DFI of at least Rs 5 lakh crore in three years.

Resolution on Stressed Assets

The high level of provisioning of the stressed assets by public sector banks asks for steps to clean up bank accounts. To consolidate and take over the current stressed debt, an Asset Reconstruction Company and Asset Management Company will be formed and then manage and dispose of the assets for the eventual appreciation of value to Alternative Investment Funds and other potential investors.

The NCLT framework will be improved to ensure quicker settlement of cases, the e-Courts system will be enforced and new methods of debt resolution and the special MSME framework will be adopted.

Social Security for Construction Workers

In order to further broaden the efforts towards the unorganised migrant labour force, FM proposed to launch a portal that would collect relevant information, among others, on gigs, buildings and construction workers. This will help formulate schemes for migrant workers for health, housing, skill sets, insurance, credit, and food.

The Budget 2021-22 has been introduced to relieve the industry from some of the pandemic-inflicted pains. The pandemic has dealt the sector a heavy blow and the proposed budget would surely bring the economy on a strong track in terms of growth, believe experts.

By: Shailaja K