The Ministry of Housing and Urban Affairs has been granted Rs 54,581 crore in the Union Budget 2021. Finance Minister Nirmala Sitharaman has presented the Union Budget 2021 on 1st February 2021. It is the first budget after COVID-19 pandemic. Because of COVID-19, India’s economic growth has been pushed to a record low and every sector has to battle the losses caused due to pandemic and subsequent lockdowns.
Every sector has its demands and expectations from the Union Budget 2021. Among them is the Real Estate sector. Because of the lockdown in the pandemic, the production was stopped and demand of the real estate also decreased along with the purchasing power of the customer.
This year, developers want to boost the demand in the real estate sector. A major demand of the developers has been to remove the ban on subvention schemes for home loans. Realtors have noted that the ban is not in favour of home buyers because a large proportion of them do not have the capacity to pay both EMIs on their home loans as well as house rents.
Let’s discuss some major expectations of the Real Estate Industry first.
1. Widen the definition of affordable housing
Apart from the subvention scheme being the main demand, industry bodies have also demanded widening of the definition of affordable housing.
Currently, residential units in metro cities with 60 square metres of carpet area and in non-metro cities residential units with 90 square metres of carpet area are considered only as affordable housing.
But According to Confederation of Real Estate Developers’ Associations of India (CREDAI), a unit with carpet area as defined under RERA should be redefined as ‘that does not exceed 90 square metres in the metros and 120 square metres elsewhere’.
2. Interest deduction under Section 24 of IT Act 1961 should be removed
National Real Estate Development Council demanded, Tax reforms sought by the developers include the demand for allowing interest on housing loans to be considered under Income Tax Deduction without any ceiling. The current limit of interest deduction under Section 24 of IT Act 1961 on housing loans of Rs 2 lakh should be removed to incentivise home buyers and spurring overall demand.
3. Long term Capital Gains from the sale of housing property should be taxed at 10 percent
The realtors also recommend that Long term Capital Gains from the sale of housing property should be taxed at 10 percent as the provision similar to section 112 for equity shares. Also, a period of holding of house property should be reduced to 12 months from existing 24/36 months to qualify the same as Long term Capital asset. restic
4. The government should consider allowing interest on housing loans under Income Tax Deduction without any ceiling
NAREDCO (National Real Estate Development Council) has demanded that the interest deduction under Section 24 of IT Act 2961, on housing loans of Rs 2 lakh should be removed to incentivise home buyers and increase the demand.
Government says we saw ‘Housing for All’ and affordable housing as priority areas. So let’s discuss what real estate gained in Union Budget 2021.
1. Increase in safe harbor limit for primary sale of residential units
Safe harbour limit has been increased from 10% to 20% for the specific primary sale of residential flats in order to incentivise home buyers and real estate developers.
2. Affordable Housing
The government provided an additional deduction of interest, amounting to Rs 1.5 lakh, for loan taken to purchase an affordable house in the July 2019 budget.
Now the Financial Minister 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.
To promote supply of Affordable Rental Housing for migrant workers, our Financial Minister proposed to allow tax exemption for notified Affordable Rental Housing Projects.
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 the same experience, convenience and safety in Tier-2 cities and peripheral areas of Tier-1 cities.
Centre will provide funding to Kochi, Chennai, Bangalore, Nagpur and Nashik a total of 88,059.05 Crores.
– 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
– Bangalore 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
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 (Development Financing Institution). Our Financial Minister provided a sum of Rs 20,000 crore to capitalise this institution.
4. LED Lights
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 lamps from 5% to 15%.
5. Portal for Construction workers
To extend the efforts towards the unorganised labour force migrant workers particularly, the Financial Minister 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.
Yes there were some nice steps taken by the government, but if the major issues that the real estate industry is facing right now should also be taken care of that everybody is hoping for.
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