India Today News - Budget 2021: Did Nirmala Sitharaman meet expectations of real estate sector?

Budget 2021: Did Nirmala Sitharaman meet expectations of real estate sector? News by India Today

In total, the Ministry of Housing and Urban Affairs has been allocated Rs 54,581 crore in the Budget 2021.

IndiaToday.in spoke to some experts from the real estate sector to understand what they think were the hits and misses of Union Budget 2021:

AFFORDABLE HOUSING

While presenting the budget, Finance Minister Nirmala Sitharaman said, "This government sees 'housing for all' and affordable housing as priority areas. In the July 2019 Budget, I provided an additional deduction of interest, amounting to Rs 1.5 lakh, for loan taken to purchase an affordable house. I propose 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.”

Besides this, she also announced that to ensure supply of affordable houses, projects in this sector can avail a tax holiday for one more year i.e. till March 31, 2022.

The move has been welcomed by real estate developers, especially those who focus on providing affordable housing.

Chairman, National Council on Affordable Housing, ASSOCHAM Pradeep Aggarwal said the incentives will lead to increase in buyers for affordable housing.

"The demand for affordable housing is at an all-time high, and we will focus on fulfilling it. The focus of the government on infrastructural development and MSMEs will lead to job creation, which will help people get financially stable. Looking at the experience of people in last one year, affordable housing will get more buyers as people want to secure their lives by owning a home".

The extension of deduction of the home loan interest will definitely do wonders for the sector, added Dhiraj Jain, Director, Mahagun Group.

The Budget 2021 announcement made by the finance minister today addresses another important problem in the real estate industry i.e. housing for migrant workers.

To promote the supply of affordable rental housing for migrant workers, Nirmala Sitharaman has proposed to allow tax exemption for notified ‘Affordable Rental Housing Projects’. Experts analyse how this will further help the migrant worker population.

"The support announced today by the finance minister for rental housing too will go a long way in boosting the real estate market and will ease a lot of pressure points in the rental home market. This will help migrant workers to a great extent and will support them in remaining in metros and other big cities during times of financial hardships such as the one presented by the Covid-19 pandemic," said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com

Ashok Gupta, CMD, Ajnara India added, "This will give a shot in the arm of the real estate developers, especially those who are engaged in providing affordable housing options for the people. This measure was introduced by the finance minister in July 2019 and has already determined its ability to be a game-changer in the affordable homes market.”

He added that the move to exempt notified affordable rental projects from taxes is also a “welcome step” in the backdrop of a number of migrant workers finding it difficult to find a home for themselves within their budget.

"Affordable housing has been a key contributor towards boosting the sector even during the Covid times. Not only will the incentives help the lower scale contractors to be "Atmanirbhar" (self-reliant), it will also boost market sentiments of real estate fraternity, especially in Tier 2 & 3 cities," said Sakshee Katiyal, CEO of Home & Soul.

The incentives announced today have led to some developers contemplating entering the affordable housing sector.

Uddhav Poddar, MD, Bhumika Group says, “It is heartening to see the government’s focus towards ‘housing for all’. The announcements have been made in accordance. We too plan on entering the affordable housing sector this year."

"Extension of tax benefits on affordable housing helps in the national goal of Housing for all," said Ar. Dikshu Kukreja, Principal Architect & Urban Designer, CP Kukreja Architect

BOOST TO INFRASTRUCTURE

Presenting the Union Budget 2021, Sitharaman said, "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.

She said 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.

Under the Union Budget 2021, 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, I shall introduce a Bill to set up a DFI. I have provided a sum of Rs 20,000 crores to capitalise this institution. The ambition is to have a lending portfolio of at least Rs 5 lakh crores for this DFI in three years," Sitharaman said.

Experts believe the boost to infrastructure will give a push to realty sector.

"The emphasis given on urban infrastructural development through the expansion of the metro rail network will help in seamless connectivity in Tier-II cities along with other prevailing announcements like RRTS, freight corridors will give thrust to the realty sector," said Santosh Agarwal, CFO and Executive Director, AlphaCorp

Experts also believe that the investment in infrastructure will further help the sector recover from the losses incurred during the coronavirus pandemic.

“The Union Budget 2021-22 was long-awaited by the real estate sector, as it could have led to a serious turn of events while the country's economy is still recovering from the brunt of lockdown. However, instead of going the direct way, FM has chosen to initiate stimulus in the related infrastructure sector, which will be bringing job opportunities to the construction workers and labourers who have suffered last year due to complete shutdown," said Vimal Monga, Vice President, Sales & Leasing (Commercial), TDI Infratech Ltd.

In the budget, Nirmala Sitharaman also announced nearly 217 projects worth over Rs 1 lakh crore to be completed under the National Infrastructure Pipeline.

"The National Infrastructure Pipeline (NIP) which I announced in December 2019 is the first-of-its-kind, whole-of-government exercise ever undertaken by the Government of India. The NIP was launched with 6,835 projects; the project pipeline has now expanded to 7,400 projects. Around 217 projects worth Rs 1.10 lakh crores under some key infrastructure Ministries have been completed," she said.

Real estate experts have welcomed the move saying that the policy will be good for the country's economy.

"Push towards national infrastructure will stimulate the national economic cycle, while directly benefitting the rural and urban employment along with indirect job creation in infra related allied industries," said Amit Modi, Director, ABA Corp & President (Elect), CREDAI - Western UP.

The Union Budget 2021 also had some provisions for construction workers.

"To further extend our efforts towards the unorganised labour force migrant workers particularly, I propose 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," said FM Sitharaman.

Manoj Gaur, CMD, Gaurs Group said, "The announcements regarding the development of highways, electrification, migrant workers, will strengthen the economy and start the recovery process. The focus on infrastructure and job creation will indirectly benefit the real estate sector."

"The infusion of lakhs of crores into India's infrastructure segment, with a focus on improving connectivity, will be particularly beneficial for India's housing sector. The proposed debt financing for REITs and InvITs, and the setting up of the Development Financial Institution for augmenting funds for infra and the real estate sector is expected to provide a major fillip to the sector, and will attract more investments," added Agarwala.

Experts added that this year's budget has been unique in terms of highest ever allocation for NHAI -- Rs 1,18,101 crores.

"I am also providing an enhanced outlay of Rs 1,18,101 lakh crores for Ministry of Road Transport and Highways, of which Rs 1,08,230 crores is for capital, the highest ever," FM Sitharaman had said while presenting the budget.

"This extended support to boost infrastructure is going to be indirectly boosting the tourism sector with improved connectivity, it would also lead to increased job opportunities in the infrastructure sector leading to improvement in employment conditions for labourers," said Aditya Chamaria, Managing Director, Damodar Ropeways & Infra Limited.

REAL ESTATE INFRASTRUCTURE TRUSTS (REITs)

Nirmala Sitharaman also proposed to make dividend payment to Real Estate Infrastructure Trusts or Infrastructure Investment Trusts (REIT/ InvIT) exempt from TDS.

"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," she said.

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, the finance minister has 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, the minister 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.

With this, real estate experts expect that there will be relaxations for increasing equity capital.

"It is to be seen what kind of easing government will carry out in InvITs/REITs. Hopefully, there will be changes in the mandated time gap between two institutional placements, and changes will be made with respect to pricing of units by REITs and InvITs for preferential issues. In view of the pandemic, we expect that there will be relaxations for raising of equity capital. Having said that, we hope that the relaxations will be good for the market, and people will see more REITs moving in," said Ashish Bhutani, MD, Bhutani Group.

"The debt financing of InvITs and REITs is an appreciative move as it will enable the real estate and infrastructure sector to attract more investments," added Anuj Kumar Garg, Vice President, Customer Engagement & Distribution, at Viridian RED which has projects pan-India.

"All I can hope now is that government can deliver especially on the infrastructure front as there is many a slip between the cup and the lip," said Prasoon Shrivastava, Founder and CEO at Zepth, a construction project management firm.

MISSES FOR REALTY SECTOR

However, there were some misses in the budget for real estate sector as well and expectations that have not been met. Developers were hoping for industry status to be provided to real estate sector and were also hoping for Input-Tax Credit benefit and measures in

"The developers needed measures that can help them in developing projects on time such as help in loans from banks, single-window clearance, ITC benefit, etc. These topics were not touched upon by the finance minister and we expect that the government will take care of these soon. The minister has announced measures that might streamline funds. The real estate sector need financing for incomplete viable projects, and we hope that banks will extend help to the realty sector," said Achal Raina, COO, Raheja Developers.

"Though the number of announcements regarding the real estate sector was few, the sector is all set to gain from the measures taken to strengthen the economy through job creation and asset management. But, the long-standing demand of giving industry status to the sector has again been ignored," added Gaur.

"Long pending demand of the real estate sector has not been met. We have been asking for industry status for the whole sector and single-window clearance for smooth functioning, the government did not comment on these requirements. Overall, the budget announcements made by the finance minister seems to be a mixed bag from the real estate perspective," said Harvinder Singh Sikka, MD, Sikka Group.

Kapil Kapur, Director, sales, strategy and business development, Bullmen Realty echoed the sentiment.

"The government could have done more to alleviate some of the pandemic-inflicted pains for the industry, which is unfortunately missing. The pandemic has dealt a heavy blow to the industry and any short-term easy financing solution for the developers could have made the deal sweeter"

On the other hand, Abhishek Bansal, Executive Director, Pacific Group said commercial and retail segment of the real estate industry has little to be excited about the budget announcements.