The real estate sector, its buyers and all other stakeholders, had put forward several demands and expectations from the Union Budget 2021-22. Some of their demands were met, whereas some were missed. The realty industry has broadly lauded the announcements in Budget 2021. Here is the list of announcements that may directly or indirectly impact the realty sector in the near future and over the long-term.
1. Monetising PSU land banks and addressing banks’ stressed asset problem
Finance minister (FM) Nirmala Sitharaman announced that a National Monetisation Pipeline of potential brownfield infrastructure assets would be launched and an asset monetisation dashboard would also be created, for tracking projects. PSUs like NHAI, Railways, PGCIL, etc., would take measures towards monetisation.
Setting up of a Reconstruction Company and an Asset Management Company, have also been proposed in the Budget 2021. The proposed institution will take care of stressed assets for banks.
2. Support to migrant workers and labourers will help realty sector growth
The government has announced a ‘one nation one ration card’ scheme that will help migrant workers to claim their ration from anywhere. The FM announced that those staying away from their families could partially claim their ration where they were stationed, while their families, in their native places, could claim the rest.
In the Budget, it was also proposed to launch a portal that would collect relevant information on gig, building and construction workers, to help formulate health, housing, skill, insurance, credit and food schemes for them. Experts point out that as the realty sector is labour-intensive, health, insurance, skill and credit support to the labours, will ensure the long-term availability of workforce for the sector.
3. Reduction in customs duty on steel to make new homes cheaper
Steel is a major constituent of the cost of a realty project. Over the last few months, steel prices have increased significantly. Home buyers and developers are financially stressed currently, following the COVID-19 pandemic. Home buyers are not in a position to pay a higher price for properties and it is not viable for builders to absorb the hike in the input cost. Therefore, the government’s move to reduce the customs duty on steel to 7.5% in Budget 2021, will provide some relief. “Touching upon the steep hike in prices of steel and other metals, the FM also announced a cut on customs duty on copper scrap from 5% to 2.5%. The availability of essential construction materials with regulated pricing, is crucial for the sector’s growth,” maintains Jaxay Shah, chairman CREDAI National.
4. Increase in safe harbour limit for the primary sale of residential units
“As a part of the incentives, the government has increased the safe harbour limit from 10% to 20%. The Budget has given tax holidays, tax exemptions and an additional deduction on home loan interest. This will give a boost to affordable housing and the entire industry, which has been reeling for the past two years,” explains Amit Goenka, MD and CEO at Nisus Finance.
5. Proposals on REITs and InvITs
The FM has proposed to exempt dividend payments to REITs and InvITs from TDS. “Also, the proposal to allow debt financing of InvITs and REITs by foreign portfolio investors (FPIs), will ease access of finance to InvITs and REITs, thus, boosting funds for infrastructure and real estate sectors,” says Rajiv Parikh, president, CREDAI Maharashtra.
6. Tax benefit for notified affordable rental housing projects and extension of Section 80EEA
The government has announced an extension in the last date to avail of the tax deduction benefit under Section 80EEA by one year. The FM also proposed to extend the tax holiday for affordable housing projects under Section 80IBA by one more year. To promote affordable rental housing for migrant workers, the FM announced tax exemption for notified affordable rental housing projects.
Source: Housing News
