COVID outbreak hit the real estate sector very hard stalling the projects, which turned into a huge problem for the real estate sector. Budget 2021 can provide a chance to bring relief to both the builders and the buyers. Real estate contributes 8% to the nation’s GDP and by 2025 real estate is anticipated to increase up to 13%.
The budget announced by the FM, respected Nirmala Sitaraman tries its best to revive the sector in various ways including infrastructure projects and extending the tax deduction deadline.
Let us have a look at how the budget of 2021 impacts on real estate.
Housing became affordable- The government provided a deduction of interest amounting Rs 1.5 lakh in the July 2019 budget for the loan on the purchase of a house which is to be extended by another one year till March 31, 2022. To keep up the supply of affordable houses, FM further proposed that the housing projects can avail a tax holiday till March 31, 2022.
Boost in the infrastructure sector- The proposed annual budget focuses on ‘Minimum Government, Maximum Governance’ boosting the infrastructure projects including roads, airports, metro line developments which would further provide employment, more investment and higher Gross Domestic Product (GDP). This boost can prove to be a helpful measure to draw more costumers to invest in real estate sector.
REITs and InvITs- The exemption on TDS and the allowance of debt financing of Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs) by Foreign Portfolio Investors (FPIs) will improve the ability to raise more foreign capital making it more profitable investment allowing more flow of funds into real estate and infrastructure sector.
Establishment of development financial fund (DFI)- Creating a professionally managed institution will help improve the liquidity and will provide more lending options acting as a provider, enabler and catalyst for infrastructure financing. A budget of Rs 20,000 crore is provided to capitalize this institution to promote infrastructure funding and 7,000 projects have been identified under the National Infrastructure Pipeline (NIP): an initiative to provide the best infrastructure across the nation to improve the quality of life, during 2020-25.
Organized labour force- To organize the labour force, FM proposed to launch a portal. It will collect all the relevant information on building and construction workers helping them to put together health, insurance, housing and food schemes for migrant workers. This step will also create new employment opportunities and improve the lifestyle of the citizens.
Along with these proposals, various relaxations have been established regarding the acceptable variance between sales consideration and stamp duty value for residential units’ sale which will be beneficial for the homebuyers. Budget 2021 focuses on improving the liquidity in the real estate sector along with creating employment opportunities. These measures proposed in the budget show the willingness and eagerness of the government to support the sector which contributes to employment and Gross Domestic Product (GDP) of the nation.