What real estate gained in Union Budget 2021?
Here is what real estate gained in Union Budget 2021 presented by Finance Minister Nirmala Sitharaman on February 1.
This government sees ‘Housing for All’ and affordable housing as priority areas, said Finance Minister Nirmala Sitharaman while presenting Union Budget 2021-22. Real estate sector had high expectation from the Budget 2021, especially post the Covid-19 pandemic.
Ministry of Housing and Urban Affairs has been granted Rs 54,581 crore in the Budget 2021.
Here is what real estate gained in Union Budget 2021:
Increase in safe harbor limit for primary sale of residential units
In order to incentivise home buyers and real estate developers, it is proposed to increase safe harbour limit from 10% to 20% for the specified primary sale of residential units
In the July 2019 Budget, the government provided an additional deduction of interest, amounting to Rs 1.5 lakh, for loan taken to purchase an affordable house.
FM proposed to extend the eligibility of this deduction by one more year, to March 31, 2022. The additional deduction of Rs 1.5 lakh shall therefore be available for loans taken up till March 31, 2022, for the purchase of an affordable house.
Further, to keep up the supply of affordable houses, FM proposed that affordable housing projects can avail a tax holiday for one more year – till March 31, 2022.
To promote supply of Affordable Rental Housing for migrant workers, Sitharaman proposed to allow tax exemption for notified Affordable Rental Housing Projects.
Debt Financing of InVITs and REITs by Foreign Portfolio Investors will be enabled by making suitable amendments in the relevant legislations. This will further ease access of finance to InVITS and REITs thus augmenting funds for infrastructure and real estate sectors.
In the previous Budget, the government had abolished the Dividend Distribution Tax (DDT) in order to incentivise investment. Dividend was made taxable in the hands of shareholders. Now, in order to provide ease of compliance, FM proposed to make dividend payment to REIT/ InvIT exempt from TDS.
Further, as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax, FM proposed to provide that advance tax liability on dividend income shall arise only after the declaration/payment of dividend. Also, for Foreign Portfolio Investors, FM proposed to enable deduction of tax on dividend income at lower treaty rate.
A total of 702 km of conventional metro is operational and another 1,016 km of metro and RRTS is under construction in 27 cities. Two new technologies i.e., ‘MetroLite’ and ‘MetroNeo’ will be deployed to provide metro rail systems at much lesser cost with same experience, convenience and safety in Tier-2 cities and peripheral areas of Tier-1 cities.
Centre will provide funding to:
- Kochi Metro Railway Phase-II of 11.5 km at a cost of Rs 1,957.05 crore
- Chennai Metro Railway Phase-II of 118.9 km at a cost of Rs 63,246 crore
- Bengaluru Metro Railway Project Phase 2A and 2B of 58.19 km at a cost of Rs 14,788 crore
- Nagpur Metro Rail Project Phase-II and Nashik Metro at a cost of Rs 5,976 crore and Rs 2,092 crore respectively
Infrastructure needs long term debt financing. A professionally managed Development Financial Institution is necessary to act as a provider, enabler and catalyst for infrastructure financing. Accordingly, FM will introduce a Bill to set up a DFI. Sitharaman provided a sum of Rs 20,000 crore to capitalise this institution. The ambition is to have a lending portfolio of at least Rs 5 lakh crore for this DFI in three years time.
Stressed Asset Resolution
The high level of provisioning by public sector banks of their stressed assets calls for measures to clean up the bank books. An Asset Reconstruction Company and Asset Management Company would be set up to consolidate and take over the existing stressed debt and then manage and dispose of the assets to Alternate Investment Funds and other potential investors for eventual value realization.
To ensure faster resolution of cases, NCLT framework will be strengthened, e-Courts system shall be implemented and alternate methods of debt resolution and special framework for MSMEs shall be introduced.
Custom duty has been increased on inputs and parts of LED lights or fixtures including LED Lamps from 7.5% to 10% and on solar lanterns or solar lamps from 5% to 15%
To further extend our efforts towards the unorganised labour force migrant workers particularly, FM proposed to launch a portal that will collect relevant information on gig, building, and construction-workers among others. This will help formulate Health, Housing, Skill, Insurance, Credit, and food schemes for migrant workers.