Realty, urban infra gain from Budget
Budget 2021 has been a balanced and growth-oriented budget, with continuity in policy in terms of the tax regime. Stock markets reacted favorably with reality indices closing the day plus with a plus of 6.5 per cent.
Budget 2021 has been a balanced and growth-oriented budget, with continuity in policy in terms of the tax regime. Stock markets reacted favorably with reality indices closing the day plus with a plus of 6.5 per cent. Key policy initiatives impacting the real estate and urban infrastructure sector can be looked at broadly in three parts a) housing, b) institutional investments in real estate urban infrastructure and c) urban mobility.
As expected, affordable housing continues to be the main focus areas for the government. The limit of additional deduction of interest of Rs 1.5 lakh on home loan and tax holiday for the affordable housing project is extended for one more year till March 31, 2022. Besides tax exemptions of affordable rental housing will be notified.
Real estate developers will be able to sell existing primary stock below 20 per cent circle rate values (with the safe harbor rule been extended to 20 per cent from 10 per cent for the specified primary residential units) without a levy of stamp duty. This will help developers exit their inventory below circle rates and boost sales.
The budget announced incentives to make REITs and InvITs an attractive investment vehicle for raising funds for the real estate and infrastructure sector by enabling debt financing by Foreign Portfolio Investors, and TDS exemption of dividend paid to REIT and InvIT.
To boost infrastructure investments, the budget allowed monetization of public sector operating assets like dedicated freight corridor of railways and warehousing assets of the central government. These are also likely to have a component of real estate play. Further relaxation in last year's policy of 100 per cent tax relaxation to foreign institutional (SWFs & PFs) investment in infrastructure to make this policy effective.
To provide long term debt capital to the infrastructure sector. A professionally managed Development Financial Institution to be established that would be capitalized with a sum of Rs 20,000 crore, with a debt portfolio of 5 lakh crore in three years.
Budgetary boost to metro rail and city bus service in urban areas especially in Tier 2 towns will boost the demand for real estate in these cities. A new scheme will be launched for Rs 18,000 crores to support the augmentation of public bus transport services. Two new technologies i.e., 'MetroLite' and 'MetroNeo' will be deployed to provide metro rail systems at a lesser cost with the same convenience and safety in Tier-2 cities and peripheral areas of Tier-1 cities.
In addition to the above to support gig workers like migrant construction workers, a portal will be developed that will help formulate health, housing, skill, insurance, credit, and food schemes.
(Dr Ashish Gupta is Director – Research & Consulting and Associate Professor at RICS School of Built environment, Amity University. These are his personal views)