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Impact of Union Budget 2021 on Real Estate Sector

Impact of Union Budget 2021 on Real Estate Sector

Published on 15 February 2021 Views 131 Comments 0
Introduction 

With the Union Budget 2021, Government of India has clearly presented their vision to act on the front foot to revive the economy from the Covid-19 situation and has set up roadmap for the growth of the economy. The Union Budget 2021 by Government of India has tried to consider the dilemma of all the section of society caused due to pandemic and had try to intercepts the grievances of each section.

So, in this blog we will be talking about the Real Estate Sector, its current state and what does Budget 2021 holds for this sector.

Present Condition:

In present scenario, Real Estate Sector is going through a phase of correction and is stagnant in terms of growth from last 6 years. In simple terms, Correction can be understood as consistency of a price at certain level for longer period of time. Also, in some areas , real estate sector has not only faced stagnancy in prices but have also seen decline in prices.

Before the slowdown, real estate sector has also enjoyed significant glorious period of 10 years between 2004-2014 and had yielded notable CAGR in healthy double digits of 30%-40%.

Future - Favorable conditions auguring real estate sector:

  • Increase in Rental Yields has been reported specially on the Residential segments.
  • Another important element which is working well for Real Estates are the low interest rate on home loans, which can work as salient feature for the growth of this sector. Low Interest Rates will secure
  • The Real Estate Sector may counter significant impact due to pandemic. But looking on brighter side, the introduction and adaptability of Work from Home Culture in the society which is mainly due to Covid-19 situation can work very well for the residential real estate sector and it may result in increase in demand in the coming time.
  • The aspect of reduction in Stamp Duty by Government in different states may also result in the increase in demand of the real estate. For instance: Maharashtra has reported the biggest sale of Real Estate in the month of December mainly due to reduction in cost of stamp duty from 6% to 4%.
  • Better regulation in place like Real Estate Regulation Act (RERA) , which was introduced in 2016 by the Government in order to safeguard the buyers can also prove beneficial for this sector. 

What does Budget 2021 hold for Real Estate Sector? 
The Government of India considered all the sections of the society to uplift them from the impact of Pandemic. Following are the key points of Budget 2021 in regards with Real Estate Sector:

  • Government of India in the Union Budget 2021 has allocated ₹54,581 crore for the Ministry of Housing and Urban Affairs. 
  • Loan taken for the purchase of affordable houses was provided with additional deduction in Interest rate of up to ₹1.5 lakh (u/s 80EEA) in the year Union Budget of 2019, this has been revised and extended this facility of additional deduction for one more year till March 31, 2022.  
  • Safe Harbor limit will be increased from present 10% to 20% to provide stimulus to buyers and developers of real estate.  
  • Tax Holiday of 1 year till March 31,2022 was announced for affordable housing projects in order to maintain the supply of affordable houses. 
  • Also, tax exemption for notified Affordable Rental Housing Projects is proposed by the FM N. Sitharaman.  
  • Allowing certain amendments in relevant legislatures for debt financing of REITs (Real Estate Investment Trusts) and InVITs (Infrastructure Investment Trusts) by Foreign Portfolio Investors (FPI). By this step there will be addition for the availability of funds for the real estate as well as infrastructure sector as it will provide ease financing.
  • Dividend Payment to REIT and InVIT will be exempted from TDS (Tax Deducted at Source). Earlier Dividend was taxable in the hands of shareholders. This can prove as attractive investment avenues for the common investor.
  • To appreciate the real estate sector growth, several other indirect measures will be followed like funds infusion in development of infrastructure.

Existing Players which might get Benefits after Budget 2021:

The declaration of tax holiday of one year in the case of affordable housing projects and continuation of additional deduction of interest on loan up to ₹1,50,000 taken on affordable housings will  certainly benefit Real Estate Players in the market like Oberoi Realty, Prestige Estate Projects, Brigade Enterprises, DLF, Sobha Ltd. and Godrej Properties.

Conclusion:

Real Estate Sector has always acted as a strong pillar of growth of economy in India and will always played a prominent role in the economy growth. Despite this Budget did not checked all the boxes of expectations expected by real state sector but any further concrete decision by the government in future for the real estate will surely boost the growth prospects for this sector. As of now, this Budget proves to be sensible and of visionary approach for real estate sector.

 

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