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Impact of Budget 2021 on Real Estate


                                                             CA Ramesh Agrawal

The Hon’ble Prime Minister MODI has always put his focus on “Housing for All’. Now the Finance Minister Mrs. Nirmala Sitharaman made it clear in her Budget 2021-22 that the affordable housing is topmost priority of Modi Government.

 

In the Union Budget 2021, Ministry of Housing and Urban Affairs has been allocated more than Rs 54,000 Crore for Urban Centers all over India.

 

Impact of Union Budget 2021 on Real Estate are as under: -

 

Safe Harbor Limit Increased for Primary Sale of Residential Units: -

To incentivize home buyers and real estate developers, it has been proposed to increase safe harbor limit from 10% to 20% for the specified primary sale of residential units.


Affordable Housing:

In 2019 July Budget, the government provided an additional interest deduction, amounting to Rs 1.5 lakh  for the loan taken to purchase an affordable house. The Finance Minister has given extension the eligibility of this deduction for 1 more year to 31st March 2022. The government will provide additional deduction of interest, amounting to Rs 1.5 lakh for loan taken up till 31st March 2022 to purchase an affordable house.

The Finance Minister has offered to allow tax exemption for notified Affordable Rental Housing Projects to increase the supply for migrant workers.


REITs: -

Enabling of Foreign Portfolio Investors in Debt Financing of InVITs and REITs by amending relevant legislations. This will help in finance to InVITs and REITs, augmenting funds for infrastructure and real estate sectors.

In the previous Budget, the government had abolished the Dividend Distribution Tax (DDT) to incentivize investment. Now, the Dividend has been made Taxable in the hands of shareholders. To do the ease of compliance, the Finance Minister has proposed to make dividend payment to REIT/ InvIT exempt from TDS.

Further, the Finance Minister has relaxed the Advance Tax Liability on dividend by saying that advance tax liability on dividend income will arise only after the declaration / payment of Dividend. Finance Minister proposed to enable deduction of tax on dividend for Foreign Portfolio Investors at lower treaty rate.

 

Infrastructure: -

The government will work on raising the public transport in urban area through expansion of Metro rail.  702 KM of conventional metro is currently operational and another 1,016 KM of metro and RRTS is under construction in 27 cities.

Two new technologies ‘MetroLite’ and ‘MetroNeo’ will be deployed to provide metro rail systems at much lesser cost with same convenience, experience and safety in the cities.

Central funding will be provided to: -

Ø  Rs 63,246 Crore for Chennai Metro Railway Phase-II of 118.9 KM.

Ø  Rs 1,957.05 Crore for Kochi Metro Railway Phase-II of 11.5 KM.

Ø  Rs 14,788 Crore for Bengaluru Metro Railway Project Phase 2A and 2B of 58.19 KM.

Ø  Rs 5,976 Crore for Nagpur Metro Rail Project Phase-II

Ø  Rs 2,092 Crore for Nashik Metro.


Finance Minister Smt. Nirmala Sitharaman said that Infrastructure requires long term debt financing. For better infrastructure financing, a professionally managed Development Financial Institution (DFI) is essentially required to act for it.

A Bill to set up a DFI was introduced by FM Minister. A sum of Rs 20,000 Crore has been provided by FM Minister to capitalize this institution.

 

Stressed Asset Resolution: -

Two types of companies i.e., Asset Reconstruction Company and Asset Management Company will be set up to consolidate and take over the existing stressed debt and then managing and disposing of the assets to Alternate Investment Funds and other potential investors for eventual value realization.

NCLT Framework will be strengthened to ensure faster resolution of cases, E-Courts system will be implemented along with alternate methods for debt resolution and introduction of special framework for MSMEs.


LED Lights: -

Custom Duty has been increased from 7.5% to 10% on inputs and parts of LED Lights or fixtures including LED Lamps and from 5% to 15% on solar lanterns or solar lamps.

 

Construction Workers: -

To formulate Health, Housing, Skill, Insurance, Credit, and food schemes for migrant workers, the Finance Minister proposed to launch a portal which will collect relevant information gig, building, and construction-workers, among others. This is an extremely helpful initiative for the migrant workers.


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Comments

  1. Radhakrishnan10 February 2021 at 05:36

    Very useful. Thanks sir

    ReplyDelete
  2. Siddharth Ranjan11 February 2021 at 18:01

    Real estate is one of the most lucrative sectors of our country.
    The government has unequivocally stated that the excess land holdings of PSUs would be rationalized. So, quality land parcels would come up for development.
    With a liberal tax regime for the REITs and reduction in TAX terrorism, international funds would flow into this sector, which is the second largest employer after agriculture. We desperately need that to happen as COVID 19 rendered around 180 million people job less.

    ReplyDelete

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