Impact of Budget on Real Estate Industry in Tricity

Real estate sector is one of the hardest-hit sector by the prolonged lockdown imposed due to the Covid-19 pandemic. Real estate being the second-highest generator of employment and contributing more than 8 per cent to the economy, The real estate industry suffered immensely due to the lockdown leading to no construction activities, unavailability of labour and dip in demand and sale of commercial as well as residential properties. Further, to add to the sector’s woes, the extended lockdown led to indefinite migration of labour to their villages, less disposable income with buyers due to increased job losses and expenditure cuts by corporates.

The market has welcomed the host of announcements in Budget 2021 that are being seen as a measure to revive the economy. From health to infrastructure, finance minister Nirmala Sitharaman’s third Budget speech tackled the wishlist of various industries and consumers that were impacted by the COVID-19 pandemic.

Affordable housing benefits extended

The finance minister has announced the extension of the time limit to avail of benefits on purchase of affordable housing by one more year, to March 31, 2022. This means, the deduction benefit of Rs 1.5 lakhs under Section 80EEA will now be available for buyers who invest in an affordable housing project before March 2022. This provides relief for buyers who were seeking investment opportunities in a market where new launches have fallen, due to the COVID-19 pandemic and developers are focussing on clearing their existing stock. The government’s push towards Housing for All under the Pradhan Mantri Awas Yojana (PMAY) will only revive the real estate sector, which has witnessed a slowdown due to large-scale policy changes such as demonetisation, GST and the RERA.

Finance Minister Nirmala Sitharaman has extended the time period of taking loans to buy such houses by one year – i.e. from March 31, 2021 to March 31, 2022 – to avail additional tax benefits of Rs 1.5 lakh u/s 80EEA of the Income Tax Act.

Section 80EEA provides tax benefits up to Rs 1.5 lakh on the interest paid on loans taken for Residential House Property for affordable housing. The benefit is over and above the tax benefit of Rs 2 lakh available u/s 24(B) of the Income Tax Act on interest on Housing Loan on both self-occupied and rented properties.

Moreover, with the FM announcing the extension of tax holiday for affordable housing projects by one more year, there is likely to be more supply in the market, with new launches gaining pace once again. The FM has also allowed tax exemption for notified affordable rental housing projects, which could further boost the prospects of this sector.

“It is a pragmatic and forward-looking budget. The estimated, gradual reduction in the fiscal deficit from 9.5% to under 4.5% by 2024-25 will help boost consumption in the economy.

No changes in direct tax

While the government left the direct taxes unchanged, senior citizens of age 75 and above are now exempted from filing income tax returns, if their income source is solely pension and interest earned from their savings. . FM Sitharman proposed to make dividend payment to REIT/InvIT exempt from TDS.  Apart from this, the FM emphasised on reducing compliance and making the system faceless, to improve efficiency and accountability. Small tax payers, which means anyone with a taxable income of up to Rs 50 lakhs and disputed income of up to Rs 10 lakhs, can approach the dispute resolution committee which will be formed for the same. In addition to this, the FM announced that the pre-filled tax forms will now include details of investments made in financial securities.

Social security for construction workers

The finance minister, in her speech, also said that the social security benefits will now be extended to construction workers and minimum wages will apply to all categories. In addition to this, a portal will be launched that will collect the relevant information on building and construction workers, which will help the government to formulate health, housing, skill, insurance and food schemes, for migrant workers. At the same time, compliance burden on employers will be reduced, with single registration and licensing and online returns. The FM also said that women will be allowed to work in all categories and also in night-shifts, with adequate protection.

GST discount for developers and home buyers

With the dwindling demand for under-construction properties new project launches coming to a standstill following the Coronavirus pandemic, developers are seeking a Goods and Services Tax (GST) cut for a limited period of time, as they feel that this could help them to speed up construction and make the inventory more attractive to the home buyers.

 The present GST rate on under-construction properties is 5% minus the input tax credit benefit for premium homes (valued above Rs 45 lakhs) and 1% for affordable homes (valued under Rs 45 lakhs), points out Ankush Kaul, president, sales and marketing, Ambience Group. “A waiver on GST will reduce the overall burden on developers and make property prices competitive,” he elaborates.

The Reserve Bank of India (RBI) on Friday decided to keep key lending rates unchanged for fourth time in a row, in its February policy review meeting. While, it projected gross domestic product (GDP) to grow at a rate of 10.5 per cent for the financial year 2021-22, on the back of recovery in economic activities.
The six-member monetary policy committee (MPC), headed by governor Shaktikanta Das, kept repo rate unchanged at 4 per cent, while maintaining accommodative stance . Consequently, the reverse repo rate will also continue to earn 3.35 per cent for banks.


Key Points Of  Budget:

Budget measuresImpactWho is impacted & how?
Affordable housing scheme extended till 31-March-2022Higher savingsFirst-time home buyer from low and middle-income households
Additional income-tax deduction of Rs 1.5 lakhs for the year 2021-22Higher savingsFirst-time home buyers from low and middle-income households. Tax deduction of Rs 3.5 lakh p/a for one more year
Tax holiday period for real estate developers on affordable housing projects extended for one more year till 31-March-2022Higher savingsFirst-time home buyers from low and middle-income households. Prices of affordable homes are likely to go down further
Tax holiday for real estate developers engaged in projects which involve renting of homes at affordable ratesHigher savingsPeople from low and middle-income households, since expectedly rentals may be lower
Reduction in Basic Customs Duty on Steel and IronLower cost of inputsLower duty on iron and steel is expected to reduce cost for inputs/components used in construction. Hence, it is expected that developers will pass on the cost benefit by reducing home prices

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