Real Estate: FM keeps to an ‘affordable’ promise

Given that Budget 2021 focusses on augmenting infrastructure, with a special focus on urban infrastructure projects, the real estate sector believes that it will act as a strong catalyst in driving demand. While there aren’t any new big-bang announcements for homebuyers per se, Finance Minister Nirmala Sitharaman has kept to her promise of boosting affordable housing in the country. In that regard, there is some cheer.

Sitharaman announced the extension of previously announced incentives such as availing of an additional ₹1.5 lakh interest deduction on home loans for first time homebuyers; extension to claim 100% tax deduction on profits from affordable housing projects; and tax exemptions for affordable rental housing projects. As per Anarock Research, affordable housing accounts for more than 35% of the housing supply across the top seven real estate markets in the country.

“For the homebuyer, the second extension of the deadline till 31 March 2022 for the additional ₹1.5 lakh tax deduction given on loans taken to buy a house in an affordable housing project is welcome, as is the developer whose affordable housing projects also get an extension for tax benefits, for projects completed till March 31, 2022,” explains Niranjan Hiranandani, National President, Naredco and managing director of Hiranandani Group.

Similarly, he adds, the tax exemption for notified affordable housing for migrant workers, and the deduction on payment of interest for affordable housing being extended by a year, will give a boost to this segment. For developers, the customs duty on steel which has been reduced to 7.5% “will create some space to real estate developers, who may not be in a position to increase prices immediately,” points out Anuj Puri, chairman, Anarock Property Consultants.

However, the commercial real estate market gets a fillip from the Budget. “Proposing to make dividend payments to REIT (Real Estate Investment Trusts) and InvITs (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,” notes Anshuman Magazine, chairman and CEO, India, South East Asia, Middle East & Africa, CBRE.

“Debt financing of InvITs and REITs by Foreign Portfolio Investors has been enabled by suggesting amendments in the relevant legislations,” he added. This is likely to ease access of finance to InvITs and REITs, thus augmenting funds for the infrastructure and real estate sector.