For the real estate industry, which had expectations from the Budget, the single important aspect which came through from the Union Budget speech by Hon’ble Finance Minister Nirmala Sitharaman, was the importance which the Government of India gives to ‘Housing for All’. This was underlined by affordable housing clearly being a priority for the Government of India.
While the Budget does not specifically mention other segments of real estate, the expectation is that positives from the budget will impact overall real estate. For the home buyer, the extension of the deadline till 31 March 2022 for the additional Rs1.5 lakh tax deduction given on loans taken to buy a house in an affordable housing project is welcome, as is the developer whose affordable housing projects also get an extension for tax benefits, for projects completed till March 31, 2022.
Similarly, tax exemption for notified affordable housing for migrant workers has been proposed under Section 80 I B A of the Income Tax Act and this will be notified in due course of time. This will be encouraging from a social security perspective, as affordable shelter will be provided to the underprivileged and migrant labour. Also, deduction on payment of interest for affordable housing being extended by a year will give a fillip to this segment.
Apart from the measures mentioned in the Budget, Affordable Housing in Maharashtra will foster as it attracts only 1 per cent GST in addition to Rs. 1,000 as stamp duty. But major metro cities like Mumbai and Delhi are unable to leverage the affordable housing incentives as a cap of Rs 45 lacs doesn’t befit here due to high land and other construction costs. Hence, a major section of MIG homebuyers fails to reap this major benefit in such metro cities.
Setting up a long term development financial fund is an incremental step in order to create additional lending options and address the liquidity constraint of the sagging real estate sector. The renewed focus on privatization and recapitalization of banks is important, again from the same perspective of liquidity constraint.
The FM, as part of Union Budget 2020-21, announced that an amendment will be made to help REITs, InvITs debt access more investment; to help these trusts raise debt funds from foreign portfolio investors (FPIs. Also, now, in order to provide ease of compliance, FM proposed to make dividend payment to REIT/ InvITs exempt from TDS.
Further, as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax, FM proposed to provide that advance tax liability on dividend income shall arise only after the declaration/payment of dividend. Also, for Foreign Portfolio Investors, FM proposed to enable deduction of tax on dividend income at a lower treaty rate which is encouraging steps to attract additional investment.
However, the never before budget lacked to stimulate additional demand that was anticipated by the industry stakeholders to help sustain the growing housing demand. Time-bound and proper implementation of the various measures is key to propel growth. As the Prime Minister pointed out earlier, the last year saw mini budgets across the pandemic impacted time frame. For real estate, especially segments other than affordable housing, the unsaid aspect is that similar steps may happen with more positives in the offing through the upcoming fiscal.
Continued focus on 'Minimum Government, Maximum Governance', as mentioned in the Budget speech, will enhance 'ease of doing business', while the proposed stimulus to infrastructure spend promises to be spectacular - roads, ports, airports, gas pipeline, warehousing, metro lines etc. This government spending will provide stimulus for GDP growth, and is laudable.
While the economy will gain from various steps proposed, which will optimistically impact real estate, the proposals also mark the transition from ‘survival’ to ‘growth’. No direct taxation is among the leading aspects which make it positive for an economy grappling with the effects of the Covid-19 pandemic. Incremental Budget plays a significant role in not just economic recovery from a pandemic crisis but also power the growth of the Indian economy to attaining the level of $5 trillion.
The author of the article is National President of NAREDCO and MD of Hiranandani Group.