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2021 to bring hope, revival for India realty

Looking forward to many positive, innovative and path-breaking announcements in the budget this year

By: Kaushal Agarwal, Chairman.The Guardians Real Estate Advisory

2021 to bring hope, revival for India realty

The year 2021, in many ways, is expected to be the year of hope and revival. The real estate sector, like other businesses, is looking forward to many positive, innovative and path-breaking announcements in the budget this year. More than ever before, the budget to follow needs to focus on pulling out the economy from one of its worst falls ever.

For the real estate sector, the 20% deviation from the FM last year’s circle rates until June 2021 for homes costing up to Rs.2 crores, should not be time-bound and needs to be extended for all real estate asset classes. The 1% GST for affordable housing needs to be extended for the entire sector until Dec 2023.

Expectations from the Union Budget 2021:

  • Deviation of 20% from circle rates should be extended across the sector and not limited to homes costing up to Rs.2 crores. The same will allow developers to offload the massive build-up of unsold inventory, costing more than Rs.2 crores. Currently, the major part of the unsold inventory is ready-to-move-in and falls in the luxury category.
  • There couldn’t be a more opportune year to accord industry status to the Real Estate sector as a whole; currently the same has been accorded only to affordable housing. This is a long-pending demand and can help developers raise funds at lower costs.
  • The government needs to push the well-capitalized NBFC’s to extend liquidity to the real estate developers who availed of the moratorium scheme during the lockdown. The same can hurt the supply side if not addressed in the budget speech this year. Separately well-capitalised NBFC’s and banks should be pushed to extend credit and liquidity to the sector players who have good equity left in their stuck projects.
  • After the decent success of its SWAMIH fund, the government should announce several more funds to help target specific real estate verticals that need liquidity support and high capital infusions like township developments and large format business parks.
  • The additional tax benefit for home loan interest announced in the previous budget now takes the tally to 3.5 lacs (Section 24 (b) & 80 EEA) for homes worth 45 lacs circle value. The same needs to be extended for homes costing up to Rs.1 crore to benefit the middle-class families residing in Metro cities.
  • The exemption period from levy of tax on notional rent, on unsold inventories, needs to be extended to 3-5 years from 2 after receiving the Occupation Certificate. This is keeping in mind the slow reduction in unsold inventory levels, the lockdowns due to COVID-19 and lacklustre demand for real estate assets.
  • Extending no tax up to an income of Rs.10 lacs to all taxpayers for a year to give impetus to demand and consumption.
  • The new tax slabs announced by the Finance Minister in the previous budget should be allowed with the old tax regime’s deductions. The move could singlehandedly impact as many as 3.75 crore taxpayers. This move is crucial, keeping in mind that the government at the centre would want to focus on demand creation by leaving more in the hands of the Indian taxpayers.
  • The reduced repo rate has helped reduce EMI’s for home buyers; the government should permit further reductions in the income tax for individuals availing homes to buy affordable and mid-income homes.
  • Increasing the standard deduction to Rs.75000 for salaried professionals will benefit less than 2.3 crore salaried taxpayers.
  • The government should declare tax free. The rent income received from anyone owned a house across the country. The same will see the young, new age investor pour money in Real Estate.
  • The real estate sector contributes the second most to employment in the country and is expected to contribute 11% to the nations GDP. Keeping the same in mind specific threshold lead incentive for developers should be announced to encourage job creation in the category.

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