The Union Budget brought with itself a mixed of goodies for the residential real estate industry, delighting some segments of the sector while disappointing quite a few others. Finance Minister Nirmala Sitharaman provided the much required succour to the affordable housing segment but leaving luxury and other categories high and dry.
Residential Real Estate Benefited Partially with Union Budget 2021
Sitharaman has extended the additional Rs. 1.5 lakh tax deduction on the home loan interest till end of March 2022. This measure is expected to help the real estate developers who are engaged in affordable housing to sell more and recover from the pandemic with greater vitality. But some of the other categories of residential real estate like luxury homes or even houses costing upwards of Rs. 45 lakh but less than 1 crore (homes costing up to Rs. 45 lakh are defined at affordable ones in India) have got no support from the Budget.
“There were hopes in the Budget for real estate as some of the announcements by the government will increase the demand for Affordable housing and REIT compliant projects. The developers needed measures that can help them in developing the projects on time such as help in loans from banks, single-window clearance, ITC benefit, etc. These topics were not touched upon by the FM and we expect that the government will take care of these soon. The FM has announced measures that might streamline the funds; the real estate sector need financing for incomplete viable projects, and we hope that banks will extend help to the realty sector,” said Achal Raina, COO, Raheja Developers.
The Finance Minister had come up with additional deduction of Rs. 1.5 lakh for interest for all home loans taken till 31 March 2020. Later on, she had extended it to home loans taken till end of March 2021. Now the same will apply till 31 March 2022, according to the Budget announcements made.
“The Finance Minister has come out for a robust roadmap for the real estate sector which will help the government vision to achieve ‘Housing For All’ by 2022. The steps announced by the FM give a sense of the seriousness and intent of the government to support the important realty industry that can provide jobs to millions of people and strength to the GDP. Various announcements by the FM today to improve the infrastructure today will also go a long in improving the real estate industry as these measures will help formation and sustenance of new micro markets on the back of new highways and expressways,” said Deepak Kapoor, Director, Gulshan.
The measures announced by the Finance Minister will lead to better and faster recovery in the real estate sector and also help it in creating new jobs.
“The extended support given to infrastructure will generate a higher degree of job opportunities for Tier II cities, leading to growth in population and higher demand for residential and commercial real estate. The support extended to migrant workers, in form of a portal for migrant workers building & construction work has been a positive move in ensuring their safety,” said Mr. Prateek Mittal, Executive Director, Sushma Group.
The residential real estate has bounced back sharply from the lows of pandemic era. The months of September, October, November and December have seen hectic activity in the housing market and both sales and registrations have touched Pre-COVID levels.
The government will also exempt notified affordable rental projects from taxes. The move is likely to benefit the large number of migrant workers in tier 1 cities. The Budget also gave some concession for the financing of REITS. “After the announcement of easing norms for InvITs/REITs, we are hoping that steps will be taken to regarding the lock-in period of units allotted on a preferential basis, and pricing related to the allotments arising out of the approval of the same unit holders. We are sure that the fresh norms will make more REITs to enter the market as the demand for commercial properties is already high, especially after the pandemic situation that has led people to realize the sound investment opportunity that commercial segment offers. The FM has also announced a new asset reconstruction and asset management company, which is set to ease out the liquidity issue in the market,” said Mr. Prasoon Chauhan, Founder & CEO of BlackOpal Group.
Certain state governments have come out with innovative sops for the real estate industry in the recent months like cutting down stamp duty charges and also the construction premium. Such sops by the Union government in the Budget today would have made the entire deal sweeter.