Budget 2021 expectations for real estate sector
The forthcoming budget will be crucial in terms of Government reforms
By: Navin Makhija, Managing Director, The Wadhwa Group
Budget 2021 expectations for the real estate sector
To mitigate COVID-19 disruptions, the Government has shown adequate support by bringing in reforms in policies and announced some slew of relief measures to revive the economy. The reduction in stamp duty before the State Government’s festive season was a significant move that gave a much-needed boost to the sector. The world resurrecting to the pandemic of Covid-19 has learnt the value of healthy living as customers too realized the importance of a well planned, well designed and a well-ventilated home more than ever before.
We immediately saw sales volumes coming back to normal due to a boost in the consumer sentiments on the back of all-time low home loan interest rates, good festive offers, relaxation in GST and reduced stamp duty. These factors helped drive demand and boosted sales and were also the key to ridding the ills’ sector caused by the virus. With the vaccination drive going in full swing, a lot is expected from the upcoming budget that will give a further boost to revive the economy.
The forthcoming budget will be crucial in terms of Government reforms, and we believe that the Government will take appropriate measures to spur consumer demand. With the pandemic’s impact remaining far in the horizon, abundant policy support is still needed for the real estate sector’s bounce. We are hoping that the upcoming budget will emphasize that.
More tax sops and higher relief on the home loan rates will woo the homebuyers and investors to buy the property. Additionally, interest rates on housing loans should be reduced to benefit a broader segment of homebuyers, including first-time buyers. Also, the income tax benefit for housing should be for residential purchasers alone; rather, it should also be extended towards commercial purchasers. This can help the sector recover from its liquidity woes to a larger extent. We would also like to revive the input tax credit under the GST reforms, which will keep the property prices under control.
The capping of Rs 45 lakh applicable for an affordable house should be extended to 60 lakhs. This would expand the benefits of affordable housing scheme to more homes and therefore boost the end-user demand. While incentives have been provided to boost the affordable housing segment, there needs to be a reduction in the cost of land, development premiums to incentivize developers to build budget homes.
Since the high cost of land is another major constraint faced by the sector, the government’s steps to unlock land parcels held by government agencies / PSUs through partnerships with affordable housing developers can be a significant step. Such initiatives can also help the government to improve its revenue generation capability. The Government also needs to allocate more funds for Pradhan Mantri Awas Yojana (PMAY) which will help them achieve ‘Housing for All by 2022’.
Timely start & completion of projects has always been a concern. A single-window clearance will help to swiftly execute projects making it a win-win situation for developers and homebuyers. The real estate sector has a significant direct contribution of around 6-7 to per cent of the GDP. Therefore, it is utmost important that the sector should be accorded with the industry status. Industry status for the sector and single window clearance for projects has been a long-standing demand which we expect the Government to address.
Apart from this, we expect a more determined infrastructure push from the Government in the form of more funds and strict guidelines on actual infra deployment. This will certainly boost the real estate sector and generate more jobs that the Government had committed to deploying.
We anticipate the Government to announce incentives that will propel the sector’s growth, such as introducing tax breaks, increasing public spending, less transaction cost, etc.