The much-awaited time has come to an end on 1st February 2021 as the Finance Minister of India presented the union budget 2021 in the parliament. The various sectors of the Indian economy have been longing for the measures and boosts from the government.
Real estate has suffered due to the pandemic and the measures from the government are expected to counterbalance the struggles. The government has announced steps and funds to support the stressed sector – Real Estate. Here are the few statements from the announced budget that buttress the real estate sector.
Finance Minister Nirmala Sitharaman announced in the union budget 2021 session that the government has extended the tax holiday for rental housing projects for one more year until 2022. It spurs the supply of rental housing projects.
As anticipated, the additional tax deductions of Rs.1.5 Lakhs for the home loans can be availed by the home buyers up to 31 March 2022. This totals the sum that can be claimed as a tax rebate to Rs.3 Lakhs on the home loans under the affordable housing sector. This helps the homebuyers add few savings and helps the developers with the boost in demand and sales.
In the previous year’s budget, the Dividend Distribution Tax was removed and the dividend was taxed at the shareholder’s end. Now, the REITs are exempted from TDS i.e., Tax Deducted at Source, and the dividends from REITs are taxed after the declaration/payment of dividends.
Debt financing of REITs by Foreign Portfolio Investors will now be allowed by making suitable amendments. The Foreign Portfolio Investors are provided with the incentive of enabling deduction of tax at a lower treaty rate. This would attract Foreign Portfolio investors into REITs and helps the developers gather funds for developing the infrastructure and boosts the real estate sector.
The centre will fund to different phases of Chennai, Bengaluru, Kochi, and Nagpur Metro projects. Finance Minister has also addressed the debt financing concerns of Infrastructure projects. On the same lines, Finance Minister said a bill would be introduced to set up Development Financial Institution (DFI). Nirmala SItharaman announced the capital of Rs.20,000 crore for the same and also expressed the ambition of having a lending portfolio of Rs.5 Lakh crore in the next three years. With this announcement, the real estate stocks experienced a spike. Indiabulls Real Estate advanced 6%, Prestige Estate 4.5%, DLF 4.2%, Phoenix 3.4%, and Godrej Properties 2.4% as soon as the Finance Minister proposed DFI. The BSE Realty Index rose 3.2%, while Sensex advanced 2% for the same reason.
This would grade up the infrastructure of the cities and enhances the connectivity which plays a vital role in propelling the property prices. The areas in the vicinity of the metro projects witness development and the demand for properties also rises.
To sum up, the Union Budget 2021 has announced initiatives like tax holidays for rental affordable housing. This might enhance the supply and support the migrant workers. The government has strategically devised a plan to attract foreign portfolio investments in REITs which is expected to ease the finance of the projects through REITs’ investment.
The union budget has spread its wings to cover the stressed areas of the real estate sector. It is all in the time that unravels the outcomes of these measures and let us hope in a favourable way.
Union Budget 2021 FAQ's:
The union budget 2021 is announced on 1st February 2021.
The tax holiday is announced for rental housing projects, the tax deduction limited is extended by another Rs.1.5 Lakhs on the home loans. The Foreign Portfolio Investments are enabled in REITs and the infrastructure projects like metro projects would be funded by the government.
The tax holiday would help the developers save some money and also encourage them to supply the rental projects in the market. This increases the supply which helps the migrant workers and creates a demand, thereby boosting the real estate activity.
The urban infrastructure developments attract many property developments in the vicinity areas of the projects. The infrastructure development also escalates the property prices and boosts the real estate sector.