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What real estate gained in Budget 2021?

Posted by Balaji on February 2, 2021
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‘Housing for All’ and affordable housing are the focus areas for this government, Finance Minister Nirmala Sitharaman said while presenting the Union Budget 2021-22. The real estate sector had high expectations from the Budget 2021, in particular after the Covid-19 pandemic.

In the 2021 Budget, Rs 54,581 crore was granted to the Ministry of Housing and Urban Affairs.

Here is what real estate gained in Union Budget 2021:

Increase in safe harbor limit for residential unit primary sales

In order to attract home buyers and real estate developers, it is proposed to increase the safe harbour limit from 10% to 20% for the specified primary sale of residential units.

Affordable Housing

In the July 2019 Budget, the government gave an additional deduction of interest, amounting to Rs 1.5 L, for a loan taken to purchase an affordable house.

FM suggested extending the eligibility of this deduction to March 31, 2022, by one more year. Accordingly, an additional deduction of Rs 1.5 lakh is available for loans to take up to 31 March 2022, for the purchase of an affordable house.

In addition, FM indicated that affordable housing projects could benefit from a tax holiday for another year until March 31, 2022, to keep up the supply of affordable houses.

To promote the supply of Affordable Rental Housing for migrant workers, Nirmala Sitharaman proposed to allow tax exemption for notified Affordable Rental Housing Projects.

REITs

Foreign Portfolio Investors’ Debt Funding of InVITs and REITs will be made possible by making necessary changes to the applicable legislation. This would also promote access to InVITS and REITs for funding, thus growing funds for the infrastructure and real estate sectors.

In order to stimulate spending, the government scrapped the Dividend Distribution Tax (DDT) in the previous Budget. The dividend was made taxable in the hands of shareholders. Now, in order to provide ease of compliance, FM recommends making dividend payments to REIT/ InvIT exempt from TDS.

Furthermore, because the amount of dividend income cannot be correctly estimated by the shareholders in order to pay the advance tax, FM suggested that the advance tax liability on the dividend income should only occur after the dividend declaration/payment has been made. Also, for Foreign Portfolio Investors, FM proposed to enable deduction of tax on dividend income at a lower treaty rate.

Infrastructure

A total of 702 km of the conventional metro is in service and an additional 1,016 km of metro and RRTS are being under construction in 27 cities. Two new technologies, i.e. ‘MetroLite’ and ‘MetroNeo’, will be implemented in Tier-2 cities and peripheral areas of Tier-1 cities to provide metro rail systems at a much lower cost with the same experience, comfort, and safety.

Centre will provide funding to:

The 11.5 km Phase-II Kochi Metro Railway at a cost of Rs 1,957.05 crore.

Phase-II Chennai Metro Railway, 118.9 km at a cost of Rs 63,246 crore.

Phase 2A and 2B Bengaluru Metro Railway Projects of 58.19 km at a cost of Rs 14,788 crore.

Infrastructure needs long term debt funding. A professionally managed Development Financial Institution is necessary to act as a provider and catalyst for infrastructure funding. FM would, therefore, introduce a Bill to create a DFI. To capitalize on this institution, Sitharaman given a total of Rs 20,000 crore. The goal is to have a lending portfolio of at least Rs 5 lakh crore for this DFI in three years’ time.

LED Lights

Customs duty has been raised from 7.5 to 10 percent on inputs and parts of LED lights or fixtures, including LED lamps, and from 5 to 15 percent on solar lanterns or solar lamps.

Construction workers

In order to further extend our efforts towards the unorganized migrant labor force, FM proposed to launch a portal that would collect relevant information on gigs, building, and construction-workers among others.  This will help formulate schemes for migrant workers for health, accommodation, skills, insurance, credit, and food.

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