2021 Union Budget Expectations, What Real Estate Wants?

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With the new years’ arrival, the hopes run high, and like any other sector, the Real Estate sector is keeping its budget expectations high from the upcoming Union Budget 2021.

2021-Union-Budget-Expectations

One of the economies’ pallbearers, the real estate sector is the second-highest employment generator in the country after agriculture. The sector contributes to over 9 percent of the Indian economy, making it a foremost contributor.

Being heavily dependent on the government’s policies and regular cash flow, the industry constantly seeks new policy support for its smooth functioning.

As Nirmala Sitharaman, the finance minister is likely to present the Union Budget on February 1, 2021, the real estate industry expects some recovery measures from budget 2021 that would help alter the sector’s future in India.

Impact of Covid-19 and Lockdown

Like all other sectors, the real estate sector was hit hard by the global pandemic, and with subsequent lockdown, all hopes were thwarted. Instead of recovery and growth, the year 2020 brought distress to this industry.

However, in its bid to help the realty sector amidst the pandemic chaos, various supportive measures were announced by the government. These included home loan interest rate, reduction in the stamp duty, and various others to support the real estate sector in India.

budget expectations
source: bsmedia.business-standard.com

Realty Sector’s 5 Key Budget Expectations in 2021

With the initiatives introduced by the Centre, the comforting news is that the economic growth as per the economic think tank National Council for Applied Economic Research the growth rate is expected to reach 0.1% in the Oct-Dec quarter and 2% in the Jan-Mar quarter of this fiscal year. This positive turn in the economic growth in the coming two quarters portends well for the realty sector. However, given the intensity of prevalent issues and looming uncertainty, the sector still requires more policy support for its speedy recovery, which is one of the things they’re expecting from the upcoming budget for real estate sector.

Let’s have a close look at the key budget expectations of realty sector from the upcoming Budget 2021:

Budget Expectations 2021: GST Waiver for Developers and Home Buyers

With a diminishing demand for under-construction properties, the new project launches have come to a grinding halt. With this, the developers urge the government to rationalize the Goods and Services Tax (GST) rates for a temporary period to help them speed up construction and help push up the residential traction. If the number of tax slabs will be reduced, it will boost the investor’s participation and collection.

Budget Expectations 2021: Measures to Improve Liquidity

The liquidity dearth has remained a concern for developers and has had a cascading impact on real estate in India since the demonetization move of 2016, following the pandemic worsening the situation even more. The developers hope that the new budget of India will have some measures to ease borrowing, as project delays have been one of the significant reasons for the cash crunch.

At this point, the developers seek a rational cash flow and capital generation to help the business run within the legal and regulatory framework and also help regulate the property prices. Not just that, but with a smooth capital generation, it will also support the developers to complete the construction on time and keep the property prices range-bound.

Budget Expectations 2021: Greater Incentives For Private Sector Investments In Housing

Despite being one of the important segments that drive our economy, the developers in the real estate sector have to struggle to get adequate funding from major banks and NBFCs at an affordable cost.

While Pradhan Mantri Awas Yojana (PMAY) has received funds from the government last year, with low-profit margins and the overall cost coming out to be much higher than the set limit, the affordable housing projects continue to be extremely low. Hence, the 2021 budget for real estate sector needs stimulus from the government in addressing this challenge so that more developers can foray into this segment.

Budget Expectations 2021: Reduce Stamp Duty

Stamp duty is the tax incurred on the property during the sale or transfer of the property. The state government levies this fee, and in most states, the stamp duty ranges from 3-8 percent and is chargeable at the time of purchasing or selling the property.

In its recent move, the Maharashtra govt. had reduced the stamp duty from 5 percent to 2 percent until December 2020. However, they had announced that after December 2020, the government had levied a 3 percent stamp duty on residential properties until March 2021. The developers expect the government to implement it on a national level.

Budget Expectations 2021: Increase in Tax Benefit

The developers have suggested the government increase in tax exemptions in the upcoming budget for real estate sector to generate healthier housing demand and enhance the deduction limit under section 80C. The upward revision is long overdue. An increase in the deduction of principal repayment of housing loan will further encourage the prospective home buyer to invest in new properties.

What remains to see is how the budget 2021 pans out for the real estate industry, and what will make its way to ministers’ draft and what all will go unheard; only time will tell. Although one thing is for sure, strong reforms are definitely the need of the hour to help the realty sector bounce back to normalcy.