Real estate seconds agriculture in the nation’s GDP with a contribution of 8% which is predicted to be growing to 13% by 2025 with commercial realty aggressively boosting the economy in the future years. Considering these facts, the Budget 2021 witnesses a major investment push in the real estate sector by our Finance Minister Nirmala Sitharaman. A large part of the real estate consisting of office spaces has shown consistent growth of 27% each year followed by retail and warehousing.
Let us have a look into what might be a benefit and what could have been included to boost real estate through the Budget 2021.
Announcements to Boost the Realty Sector We Applaud
Tax benefits for affordable housing and private investment formats such as Real Estate Investment Trusts and Infrastructure Investment Trusts (REITs and InvITs) have been some major reasons for the realty sector to witness such growth despite the pandemic in 2020. The tax exemption benefit and interest deduction on loans has been proposed to be extended by another year until March 2022.
Tax exemption for Affordable Rental Housing Projects to make rental homes more reachable to aid migrant workers is a genuinely commendable move which shall make renting homes easier for them.
The Finance Minister Nirmala Sitharaman has incentivised the REITs and InvITs with the exemptions on TDS (tax deducted at source) that counts for a step taken with greater foresight. She has also given projection for permission of foreign portfolio investors for the public in order to increase participation and cash-flow into the real estate and infrastructure sector.
Indirect measures to assist the realty sector to boost capital appreciation of local properties is also being proposed by the FM which includes adding funds to infrastructure development.
Measures We Anticipated for Inclusion
2020 has been a disappointing year for the economy globally and while the financial markets where drowned, real estate has been the only one to gain momentum by the third quarter. Despite such performances, real estate has still not been given industry status even now when liquidity can be immensely helpful in recovering from the pandemic-related impediments. Doing this would be beneficial to the NBFCs, HFCs and banks to regain NPAs resulting in the overall profit of the entire economy. This would have been extremely profitable for the developers to refinance their outstanding.
Rational capital supply, access to funds and longer repayment cycles are some more measures that developers were looking forward to.
With common people diving deeper into real estate investing, it was also expected to extend benefits given to REITs to shared or fractional ownership that would eventually attract more investments in the commercial realty sector.
While the announcements have been predicting benefits for the sector, there are some areas that have gone overlooked even in these projections. The Budget, therefore, makes us hopeful for inclusion of the above discussed measures by the government sooner or later.
