Union Budget 2021 India: Being a significant contributor to the GDP, real estate deserves reasonable attention in the budget speech, with provisions to deal with obstacles in the path of development.
Indian Union Budget 2021-22: Almost all sectors of the economy faced myriad challenges in 2020, but showed great resilience in dealing with them. Business activities started gaining pace by the end of last year and gave immense confidence for promising days in the New Year. Therefore, the expectations from the forthcoming Budget 2021 are huge. It is speculated that the government would come up with a slew of measures to push the business and commercial activities to reach the desired growth figures. Being a significant contributor to the GDP, around 8%, the real estate sector deserves reasonable attention in the budget speech, with provisions to deal with obstacles in the path of development.
There is a widespread anticipation that the long pending-demand of industry status to real estate will be at Centre-stage in this budget, which will help the sector in raising funds in the market. Infrastructure status to all residential projects is also expected, which currently is given only to affordable housing projects. Further, to make the sector get adequate funds to meet all the requirements, a nod for 100% FDI through automatic route in completed residential projects will be a major impetus for the sector.
A plethora of measures are the need of the hour to propel the growth in the sector, including the reimplementation of Input Tax Credit (ITC) and allowing realty players to avail the benefit along with low GST rates of 1 and 5 percent, respectively. The other major step to encourage the sector would be Goods and Services Tax (GST) waiver for under-construction homes for at least next 2 years. It will help in bringing down overall property costs, thereby upgrading the demand in under construction and unsold housing units which are in significant numbers in the metropolitan cities. Capping of GST at 1 per cent for all under-construction projects instead of complete waiver will also help real estate. The suggestion of CREDAI to allow investment of up to Rs 50,000 in REITs as deduction under section 80C will be an appreciable move. Further, for long-term capital gains, a reduction in holding period of REITs to 1 year from current 3 years will work as a major stimulus. An increase from 10% to 20% in differential rate had been announced last year with the applicability till June 30, 2021; the period should be extended for at least next 2 years.
It is important to attract the end-users, and the announcement of monetary incentives for them will be efficacious in this direction. Personal Tax relief is one of the most demanded changes in the upcoming budget; it can be in the form of additional tax rate deductions on the home loan interest payment for housing units or by amending tax slabs. Extension of the benefit of Section 80EEA to all categories of home buyers will further augment the demand. Furthermore, under Section 24 of Income Tax Act, a hike in rebate on housing loan interest rates, from 2 lakh to at least Rs 5 lakh, for generation of healthy housing demand in affordable and mid-housing segments, will be a great move.
This budget is expected to address the issues of the sector to trigger a growth in the economy. Real estate is not only among the biggest contributors to GDP but also a great employment provider. Hence, the sector is confident that the budget would resolve the hindrances that come in its way. At this very ground the expectations seem quite justifiable and there is a widespread hope that the government would consider them all.
(By Santosh Agarwal, CFO & Executive Director, Alphacorp)