Covid-19 has deeply impacted and affected the economies of the world with one of the hits being the real estate sector. With expanding job and academic opportunities in the pre-Covid scenario, there was a huge demand for commercial & office spaces in Pune and 2 & 3 BHK flats in Pune. But with the onslaught of Covid-19, the sales in real estate have been considerably impacted.
However, with its scheme of incentives, the Union Budget 2021 aims to give a much-needed boost to the sector. To revive the sector, Finance minister Nirmala Sitaraman has announced various measures in the Union Budget 2021-22. The Ministry of Housing and Urban Affairs has been granted Rs 54,581 crore in the Union Budget 2021. To incentivize home buyers and real estate developers, it is proposed to increase the safe harbor limit from 10% to 20% for the specified primary sale of residential units
Pointers for real estate in the Union budget 2021
Affordable Housing
To boost growth and consumption, tax exemption for affordable housing has been extended for a year. The central government had offered an additional income tax deduction of up to Rs 1.5 lakh for home loans in the July 2019 Budget. The eligibility for this tax deduction was extended until 31st March 2022 by Sitharaman. The additional deduction of Rs 1.5 lakh shall therefore be available for loans taken up till March 31, 2022, for the purchase of an affordable house.
Besides this, there has been a one-year extension (up till March 31, 2022) of the tax holiday for affordable rental housing projects to ensure affordable housing for migrant workers. This measure would maintain affordable housing demand in 2021 as also the supplies.
REITs
The government will make changes in the current regulations to support Foreign Portfolio Investors’ Debt Funding of InVITs and REITs. This would also promote access to InVITS and REITs for funding, thereby increasing funds for the infrastructure and real estate sectors.
Further, to boost investment, the government had scrapped the Dividend Distribution Tax (DDT) in the previous Budget. So for the shareholders, dividends were made taxable. In the Union Budget 2021, FM has now recommended that the dividend payment to REIT/InvIT be removed from TDS to provide ease of compliance.
It was observed that the amount of dividend income cannot be accurately determined by the shareholders while paying the advance tax; FM proposed that the advance tax liability on the dividend income should only occur after the dividend declaration/payment has been made. Also, for Foreign Portfolio Investors, the FM suggested allowing dividend income tax deductions at a low treaty rate.
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Resolutions for Stressed Asset
It has been proposed that an Asset Reconstruction Company and Asset Management Company would be set up to consolidate and take over the existing stressed debt of banks; manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realization. Besides, for faster resolution of cases, the NCLT framework will be strengthened, the e-Courts system shall be implemented, a special framework for MSMEs and alternate methods of debt resolution shall be introduced.
Proposals for Construction workers
To organize the otherwise unorganized labor force with migrant workers, in particular, the FM proposed to launch a portal that will collect relevant information on gig, building, and construction workers. This database would not help identify work for them but would also help formulate Health, Housing, skills, Insurance, Credit, and food schemes for the migrant workers.
Realty is one of the crucial economic engines of the economy. While the stamp duty cuts from the Maharashtra govt. have surely increased home buying interest in the Pune region, the above said measures in the Union Budget would further boost sales and demand across the sector.