Budget 2021: Input tax credit, tax relief, funding support, other policy reforms on realty sector wishlist

Updated: Jan 31, 2021 5:56 PM

Union Budget 2021 India: While every budget is about bringing reforms and measures to enhance the economic progress of the country; this budget is more about bringing the economy back to track

Budget 2021-22, Union Budget 2021Real estate is one of the most important sectors of the Indian economy. Image: Reuters

By Sunny Katyal

Indian Union Budget 2021-22: The Union Budget 2021 is one of the most awaited budgets in the history of Indian economy. While every budget is about bringing reforms and measures to enhance the economic progress of the country; this budget is more about bringing the economy back to track. 

Real estate is one of the most important sectors of the Indian economy. It is an active contributor to the economy being one of the biggest employment generators of the country. The sector’s contribution to the economy, post COVID 19 has also been very significant. Industry developers and consultants have tirelessly worked on developing schemes and offers throughout 2020 to keep the business rolling in the sector. “Once in lifetime” offers have been provided to build and sustain consumer interest, which gave a huge push to the sector despite the trying times. 

The industry expects constant support from the government for policies and cash flows which is strongly required for its functioning. Below are some of the expectations from the government for Budget 2021. 

Bring back the Input Tax Credit: The government should look at bringing back input tax credit as developers have to pay GST on various goods and services during the construction of projects. Input tax credit will help in bringing down the cost of construction, which in turn will help in lowering price of properties.  It can be one of the leading factors for boosting demand in the sector.. 

Tax relief for the consumers: Consumer demand is one of the key push factors in the real estate market. Especially post COVID; it is consumer demand which keeps the business rolling. Housing real estate will be able to sustain the momentum only when consumer demand is in a sustained mode. Hence, higher tax relief for home buyers should be looked into for this budget. Cap of INR 2 lakh on housing loan interest, should be increased to INR 4 lakhs. Affordability on home buying has always been one of the major concerns for real estate; some tax relief will boost consumer sentiments and drive more demand. 

Relaxation in fundraising norms: The sector needs liquidity for better functioning and timely deliveries. Due to lack of liquidity, real estate is facing a lot of challenges like delayed projects, unsold inventories and high project costs. The government should look at incentivizing the real estate private players and also look at relaxation of fund raising norms. 

Funding support for mid-income projects: COVID 19 has badly impacted the smaller developers, especially in Tier 2 & 3 cities. These developers are continuing to face significant cash flows which is affecting their projects. If the government can set up last-minute funding support for affordable and mid-income projects, the small-time developers can avail the funds to ensure that there is no further delay in stalled projects. This can also lead to increased demand for such projects as incomplete projects are one of the main reasons for the slowdown in consumer demand in this segment. 

Budget for 2021 is crucial for real estate; a lot of business development would depend on what positive measures and policy reforms are taken by the government. The entire industry is eagerly waiting with watchful eyes for the announcement for the much-needed reforms and incentives, genuinely required to boost this sector.

(Sunny Katyal is Co-Founder of Investors Clinic. Views expressed are the author’s own.)

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