Budget 2021 for real estate sector: Will FM’s announcements help revive the ailing sector?

In order to provide relief to the ailing real estate sector, the Union Finance Minister made a slew of announcements. FM Nirmala Sitharaman announced debt financing of InVITs and REITs by foreign portfolio investors (FPI) to make suitable amendments in the relevant legislations. This will ease access of finance to InVITS and REITs, augmenting funds for infrastructure and real estate sectors. In another announcement, providing relief to taxpayers, FM informed that advance-tax liability on dividend income shall arise only after the declaration/payment of dividend. “The dividend paid to Real Estate Infrastructure Trusts or Infrastructure Investment Trusts (REIT/InvIT) shall be exempt from TDS,” Sitharaman said. FM also proposed to clarify that deduction of tax on incomes including dividend income of FPIs may be made at treaty rate. “It is also proposed to exempt dividend payment from levy of Minimum Alternate Tax (MAT) for foreign companies if the applicable tax rate is less than the rate of MAT,” she added.

Here’s what Real Estate experts say-

Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani

With the growth outlook looking promising and support in terms of government spending, we will witness noteworthy traction in the real estate sector too this year. Though real estate has not got anything directly from this budget, there are announcements that will indirectly help the sector. Allotment of a massive capital expenditure corpus in order to enhance and support national highway projects, roads and other ancillary infrastructure show the continued commitment of the Government to strengthen connectivity across the country which in turn will largely improve real estate over the next few years. While affordable housing continued to remain a priority area for the government with few additional reforms, the government could have given a further boost to real estate which fuels the Indian economy as it is the second-largest employer after agriculture and supports over 250-allied industries.

There have been many pressing concerns in the real sector that have not been addressed such as easing liquidity, reduction in levies/taxes, tax deductions on home loans to give impetus to buyer sentiment, granting of industry status to the overall real estate sector and implementation of single window clearance amongst others. Overall, while the social sector has received good support and is welcome, we are convinced that the government will do its best to get the economy to bounce back, and sustain long term growth of the real estate sector too with substantial measures in the near future. We also hope that there will be more announcements soon to enhance ease of doing business for the developers and are optimistic that with green shoots in the economy in sight, the real estate sector is ready for explosive growth in the post pandemic era.

Rohit Poddar, Managing Director, Poddar Housing and Development Ltd. And Joint Secretary, NAREDCO Maharashtra

For affordable housing, the extension of deduction on payment of interest by one more year will help in offering the much-needed convenience for the home buyer. Affordable housing tax holiday extension up to March 2022 will boost the recent momentum in housing demand. Furthermore, relaxation of tax to NRIs, an additional interest deduction on the loans, and no TDS on REITs will potentially help the real estate sector in increasing the liquidity and cash flow. Giving relief to NRIs from double taxation will give a sentiment boost to the real estate sector.

Anshuman Magazine Co-Chairman, CII National Committee on Real Estate; Housing and Chairman and CEO – India, South East Asia, Middle East and Africa, CBRE

In a move to extend efforts towards an unorganized labour force, the launch of a new portal (to collect information on gig, building, and construction-workers among others) will enable targeted relief measures like labour monitoring and provision of various benefits/schemes for these workers. This is likely to be beneficial for the Real Estate sector as the sector continues to be a leading employment generator in the country. The real estate industry also appreciates the fact that FM extended the interest deduction for home buyers and the tax holiday for affordable housing projects (both by a year) which should also catalyse more growth. Additionally, to provide for housing for migrant workers, the FM proposed tax exemption for notified Affordable Rental Housing Projects. Details on this tax exemption are awaited. Proposing to make dividend payments to REIT (estate investment trusts) and Infrastructure investment trusts exempt from TDS this year is another great move as it will be helpful in addressing the liquidity situation in the real estate industry.

Debt Financing of InVITs and REITs by Foreign Portfolio Investors has been enabled by suggesting amendments in the relevant legislations. This is likely to ease access of finance to InVITS and REITs thus augmenting funds for the infrastructure and real estate sector. It is also important to note here that all of these reforms indicate PM’s Modi’s efforts towards a budget which is in continuation of government efforts to revive sectors impacted by pandemic. Needless to say, today’s budget has provided the hope to infrastructure and real estate industries and will go a long way in ensuring integrated development of both the sectors.

Ketan Sengupta, CEO of Bengal Peerless Housing Development Company

Budget 2021 is reasonably practicable with lot of positive aspects. The 1.03 lakh crore investment in National Highway projects is a great boost for the infrastructure sector that will lead to economic growth and pave the way for employment generation. The Extension of incentive schemes for startups and MSME is also a move in the right direction for growth. Other positives include increasing limit of FDI in insurance sector and greater funding for health care sector. However this year’s budget is a disappointment for the real estate industry in though tax holiday for affordable housing projects has been extended till 31st March 2022, limits on I-T exemption for housing loan under section 24 (b) 80EEA have remained unchanged. Stock in hand for developers after two years of completion is considered as deemed demand and taxed under section 23(5). A relaxation of the said section would have been a favourable outcome for real industry.