The Union Budget 2021 has presented a unique opportunity for the affordable housing sector in India. Both developers and buyers think that the tax holiday extension proposed by Finance Minister Nirmala Sitharaman will not only give a boost to this sector but will also go a long way in fulfilling the promise of “Housing for All.”

Tax Boost for Affordable Housing

The government expanded the period of extra deductions of Rs 1.5 lakh available for loans until 31 March 2022 in affordable residential and rental housing to a large extent. The need for affordable housing will begin to rise in 2021 substantially, believe experts. Furthermore, the extension for a further year would help move new supplies to this segment by expanding the tax vacation for affordable housing projects.

Additionally, infrastructure works have also been proposed that include the development of 8,500 km of highways by March 2022. The government has also announced that it would set up DFIs (Development Finance Institution) to give Rs 20,000 crore to improve infrastructure projects. Customs duty on steel has been reduced to 7.5% that will provide a space for property developers who may not be able to instantly increase prices.

Announcements on infrastructure and real estate monetisation would also help the private sector engage in the growth of essential infrastructure assets and assist the government in enhancing fund flow. Furthermore, through a one-year extension of tax benefits, the government spotlight will continue to be on affordable housing.

This extension was required in the context of the prolonged pandemic situation to support the country's latent housing demand. In addition, relaxation for REIT (real estate investment trust) investor’s tax compliance would boost their marketing capacities, since this year people are likely to see new REITs.

The proposed easing of liquidity constraints by InvITs/REITs would draw more REIT listings and higher investments in the real estate industry. The announced monetisation of surplus land by the government is also being seen as a positive move. However, it is easy to determine implementation.

Even though the government has not announced any major new real estate policies or initiatives, the budget nonetheless demonstrates its commitment to boosting affordable housing.

By: Shailaja K