Finance Minister Nirmala Sitaraman has finally announced Union Budget 2021 on February 1, 2021. Various policies and amendments are introduced. The government has introduced various reforms to boost the affordable housing sector as well. Let’s discuss how Union Budget 2021 will benefit real estate sector.
How Real Estate will be benefited from Budget 2021?
Relaxation to Affordable Housing:-
In the budget of July 2019, the government cut the interest, corresponding to Rs 1.5 lakh, for the loan taken to buy affordable homes. Now, the Finance Minister (FM) has continued this deduction till another year i.e. 31 March 2022. An additional 1.5 lakh deductions will be available for loan taken to purchase an affordable home. This loan waiver will be discontinued after 31 March 2022.
To boost the supply of affordable houses, FM proposed that affordable housing projects can take advantage of tax holiday. This tax exemption is valid till 31 March 2022.
Budget 2021 provides tax exemptions for notified affordable rental housing projects, this will contribute to the demand of affordable rental housing for expatriate professionals. Hence, union budget 2021 will benefit real estate in affordable housing sector.
Debt Financing of InVITs and REITs by Foreign Portfolio Investors will be permitted by appropriate amendments in the respective legislation’s. This will increase the ease of finance for InVITs and REITs and thereby increase funding for the infrastructure and real estate sectors.
To boost the investment, the government in the last budget had removed the DDT (Dividend Distribution Tax) and it was made taxable in the hands of shareholders.
But now dividend payment will be made to REIT/InvIT in addition to TDS, which will facilitate ease of compliance.
The amount of dividend income for payment of advance tax cannot be properly calculated by the shareholders. But after the announcement of budget 2021, advance tax liability on dividend income will be applicable only after payment of dividend. Thus budget 2021 will benefit real estate in a financial way as well.
The finance minister has proposed several points to boost the infrastructural development. In today’s scenario, 701 km of conventional metro is in working condition. Approximately 1,015 km of RRTS and metro is under development in 28 cities. The government also proposed a strategy for two new metro train technologies i.e, ‘MetroNeo’ and ‘MetroLite’ in Tier 2 cities and outer areas of Tier-1 cities. These metro projects are more cost-effective than common metro rail systems but provide similar convenience and experience.
The centre government will provide funding to various infrastructural projects-
Chennai Metro Railway Phase-II of 119 km, the estimated cost will be Rs 63,245 crore.
Kochi Metro Railway Phase-II of 11.6 km, the estimated cost will be Rs 1,958 crore.
Bengaluru Metro Railway Project Phase 2A and 2B of 59 km, the estimated cost will be Rs 14,789.
Nagpur Metro Rail Project Phase-II and Nashik Metro, the estimated cost will be Rs 5,977 crore and Rs 2,093 crore. Thus budget 2021 will benefit real estate in terms of infrastructure as well.
Stressed Asset Resolution:-
The high degree of provision of banks in the public sector of their stressed assets requires measures to clean up the bank books. For this, an Asset Management and Asset Reconstruction Company would be set up to take over the previous stressed debt. Then manage and dispose of the assets to Alternative Investment Funds and other trustworthy investors for final value realization.
Further NCLT framework will be made more robust and reliable, e-courts system will be established. Other policies for debt resolution and a dedicated framework for MSMEs are yet to be introduced.