Union Budget 2021 : Real Estate Sector Expectations

Through its full support by rolling out initiatives like stamp duty cuts,  the government eased the challenges faced by the real estate sector during 2020. It is now that part of the day again where the stakeholders of real estate are expecting the rays of hope to shine bright. If you understand what I mean, yes! The union budget 2021 is around the corner!

The developers and buyers are expecting the upcoming budget to bring in some tax sops and reforms that would be beneficial for the end-users. Let us get to the measures that the industrial experts are speculating that the budget might propose and also know how they would alter the markets.

Union Budget 2021 Predictions

Income Tax

The tax deductions under Section 80 C can be claimed up to the maximum of Rs.1,50,000. Real Estate experts are expecting an additional Rs.1,50,000 annual deduction to help the housing sector boost sales. 

Also, under section 24(b), the interest on the home loans paid can be claimed as a tax rebate with the cap of Rs.2 Lakhs per annum. The government might revise this cap rate to a higher value that favors the home buyers by saving a few pennies. 

The cap rate for affordable housing is Rs.45 Lakhs which is expected to be revised for a higher price owing to the construction costs in the metro cities.  

These expected moves might support positive trends in housing sales further and help the industry clear the premium and unsold inventory.  

REITs

REITs provide a great investment option for investors of all budget points. REITs are a safer investment option due to the diverse investments by the company. The returns from REITs could be used to prompt fresh investments into the market by reducing the timelines on the capital gains.

The long-term capital gains obtained from the REITs returns can be invested within three years to avail of the tax exemptions on the capital gains. This rule could be amended to reduce the timeline from three years to one year which would encourage the investors to pour the money into the industry early. It would ease the stressed properties and projects that face a cash crunch. 

The experts are expecting this step from the government to propel the new launches into the markets and stimulate the gloomy trends that the industry has experienced in yesteryear. 

Circle Rates

The permissible difference between the circle rate and market value was increased to a cap of 20% from 10% during the festive season as a boost to developers. This meant that the properties could be sold at a rate that is 20% below the market value to stimulate the demand in the markets. This was announced by the Finance Minister for the housing sector with the maximum price of Rs.2 Crores and was given a deadline of up to June 2021 to create a rush in the markets. 

The timeline is expected to be removed and the cap rate on the housing could also be increased to bring the housing sales back on track. The developers could then avail of the offer for a longer duration and clear off the premium stock.

Stress Fund

The stress fund for the stalled projects like SWAMIH (Special Window for Affordable and Mid-Income Housing) was earlier released to bring some relief to the developers whose projects were halted due to the lockdown during the pandemic. The sequel SWAMIH – II is expected to release which could be planned as state-centric and the state can share a load of 50%. 

This could help the developers substantially and if planned to fund only the projects from Tie 2 and 3 cities, it would extend great support to the projects and help the growth of the industry. 

Bottom Line

The government has offered the boost through various policies to bring the sector from the jolt experienced due to the pandemic. But, the budget 2021 is a crucial one as the industry is waiting for the push from the government to get back to normalcy. One of the biggest employing sectors of the country, contributing almost 8% of the GDP, the real estate sector has been looking for policies that help in smooth functioning. The income tax, circle rates, and stress funds are some of the areas that the government can explore and offer incentives to favor the end-users and promote the real estate industry ultimately.

Amid the speculations, if the budget has policies favoring the end-users, it is the best time for the investors to grab the opportunities. Want to invest in property? Assetmonk is an online real estate investing platform that lists out the highly curated assets on the platform. The assets have high expected yields, of an IRR of up to 21%, the best in the market. We offer various investment opportunities through our products to meet every investor’s goals. Click here to know more!