Home Budget 2021 Post Budget Reaction: Real Estate & Infrastructure Sector

Post Budget Reaction: Real Estate & Infrastructure Sector

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Budget 2021

The Finance Minister Nirmala Sitharaman presented the Union Budget 2021 on Monday where she made a lot of announcements for various sectors. This was the first budget after the pandemic where everyone had some expectations from the finance minister. Here are the reactions from the Industry experts of the Real Estate & Infrastructure Sector.

Mr. Pradeep Misra, CMD, Rudrabhishek Enterprises Limited (REPL)

As it was expected and much needed, there is massive emphasis on infrastructure in the union budget. The number of projects under NIP (National Infrastructure Pipeline) has been extended to 7400, which will help in generating immediate employment. Focus on Affordable Housing section continues with the extension of eligibility to avail benefits for another year. Plan to set up ‘Development Financial Institution’ with fund infusion of Rs. 20,000 crores for financing infrastructure & development projects will further help in mobilizing the long term capital, especially through debt instruments. This should be vital in pulling out the projects that are stuck or slowed down. The aim to complete 11,000 Km of National Highways; seven Port projects worth Rs 2,000 crore in PPP mode; extending metro in Tier 2 cities and peripheral areas of Tier 1 cities etc. will collectively create a vibrant economic conditions of growth. As mentioned by the Hon’ble Finance Minister, fund infusion in infrastructure sector will have to be accentuated by multiple measures, including monetization of assets, creating institutional structure as well as raising the union & state governments’ budgetary allocations.  Overall, the budget has set the tone of intense infrastructure development in FY 21-22 and following years.

Neetish Sarda, Founder, Smartworks –

“Hon’ble FM’s vision for Atmanirbhar Bharat with a budget focused on six essential pillars is commendable. The government has set an ambitious target to build infrastructure in the country and increase focus on digitisation and public investments. The proposal to exempt dividend payments on REITs and InVITs from TDS will surely boost investor sentiment thus augmenting funds for infra and real estate sectors. Initiatives to boost the Indian startup ecosystem by incentivising the setting up of One Person Companies (OPCs), announcing tax holidays and an extension in capital gains exemption are welcome steps.”

Prashant Solomon, MD, Chintels India and Hon. Treasurer- CREDAI NCR – 

Finance Minister has presented a forward looking Budget that is aimed at generating investments and reigniting the growth cycle. The government’s big bet on infrastructure is bound to pay off in the long term and bring in growth for real estate and allied sectors.  Giving flexibility to REITs to raise more debt capital will attract more investment in the real estate sector and will lead to faster closure of transactions. The decision to extend tax holiday for affordable housing projects is a step in the right direction and will help realise Prime Minister’s dream of ‘Housing For All by 2022’.

Prasoon Chauhan, Founder & CEO, BlackOpal

“After the announcement of easing norms for InvITs/REITs, we are hoping that steps will be taken to regarding the lock-in period of units allotted on a preferential basis, and pricing related to the allotments arising out of the approval of the same unit holders. We are sure that the fresh norms will make more REITs to enter the market as the demand for commercial properties is already high, especially after the pandemic situation that has led people to realize the sound investment opportunity that commercial segment offers. The FM has also announced a new asset reconstruction and asset management company, which is set to ease out the liquidity issue in the market.

Overall, the Budget focused on jobs and fund infusion in MSMEs, which would help the market recover. The real estate sector, being an inseparable part of the economic growth, will also gain from the measures taken to expedite growth in other industries.”

Mr Sharad Mittal, CEO,  Motilal Oswal Real Estate

“Given the current scenario, the Budget’s focus has been healthcare. While there hasn’t been a lot of cheer for real estate, the Government has continued its focus on “Housing for All” by extending timelines to avail the additional deduction of Rs. 1.5 lakh and for developers to avail the tax holidays to boost both demand and supply. Additionally, allowing FPIs to finance debt of INVit and REITs will create more liquidity in the sector.

Other positives include setting up of a long term financing vehicle “DFI” for infrastructure projects and no increase in income tax rates. Increase in fiscal deficit target is expected to impact yields, however, there has been a strong intent to promote growth rather than maintaining fiscal discipline with a sharp increase in proposed capital expenditure. This is a positive move by the Government and will have a defining impact on the economy.”

Shrinivas Rao, CEO-APAC, Vestian

“The Union Budget 2021 continues to provide impetus to ‘Aatmanirbhar Bharat’. Coming on the heels of a global health crisis, the focus is on providing a fiscal push to revitalise the economy. It lays emphasis on strengthening infrastructure—connectivity, health  and rural economy, while also  emphasizing on  industrial growth and global competitiveness, to attract foreign inflow to the country, mainly by way of proposing to increase FDI limit in the insurance sector to 74%. Additionally, the fact that suitable amendments would be carried out to enable debt financing of InVITs and REITs by foreign portfolio investors, bode well for infrastructure and real estate sector as this will ease access to finance.

The budget also proposes the setting up of a Development Finance Institution (DFI) capitalised with Rs 20,000 crore. This comes as a pertinent measure to ease financing of real estate  infrastructure and to help overcome the pandemic-induced constraints, considering that very few commercial lenders are willing to take on infrastructure risk now. While extension of tax holiday on affordable housing for another year is aimed at maintaining momentum in the residential sector, the government has reiterated its commitment to affordable rental housing for migrant workers by allowing tax exemption for notified affordable rental housing projects. Another significant announcement enhancing the country’s business environment is the extension of tax holiday for start-ups by one more year, while also proposing to reduce margin money requirement to 15%. Overall, the budget strives to touch upon several key issues impacting the economy and going forward, it would be interesting to understand the new developments.” 

Mr. Kamal Khetan, Chairman and Managing Director, Sunteck Realty Ltd.

“The Union Budget has packed some great ideas and a definite direction for strong economic growth ahead, especially through infrastructure, capital expansion and banking and financial services. For real estate, the move to extend the tax holiday available for the purchase of affordable houses as well as for the affordable rental housing projects is a welcoming move as it would further strengthen the confidence among both developers and homebuyers. The move will certainly prompt more demand, especially among first-time buyers who generally fall in the lower and mid-income segments. Also, the extension of the tax holiday on affordable housing projects for developers by another year will increase the project launches in this segment as they would get additional time and resources. Apart from this, the mega infrastructure development and upgradation to be undertaken across India will add much value to the real estate sector.”

Mr Rakesh Reddy, Director, Aparna Constructions & Estates

“In the aftermath of the COVID-19 pandemic, the Union Budget 2021 was highly anticipated to fuel economic revival. It was to be a balancing act between high expectations and minimal resources. The Budget focused on healthcare – to provide crucial COVID-19 rehabilitation – and infrastructure as key segments to aid in the revival. The infrastructure sector is a key driver of India’s economic growth and is the second largest employer in India. The growth of the sector has a multiplier effect on the growth of the entire economy and must be bolstered.

Rapid development in infrastructure requires a strong inflow of capital. Debt financing of InvITs and REITs will be enabled by making a suitable amendment to attract more investment in the real estate and infrastructure sector. In a positive step for the affordable housing segment, the time period for taking loans in this segment will be extended by one year, until 31 March 2022, to avail additional tax benefits of Rs 1.5 lakh under section 80EEA of the Income Tax Act. The benefit is over and above the tax benefit of Rs 2 lakh on interest on Housing Loan available under section 24(B).

Although several proposals were announced for the benefit of taxpayers, there was no change in income tax slab rates. Disposable income is a substantial constraint on demand so personal tax relief must be addressed by revisiting the tax slabs and also increasing the deduction limit under Section 80C. Such benefits will provide crucial support to the real estate sector.

The Budget also proposed to provide GST relief by reducing inverted GST structures. There are hundreds of old exemptions in indirect taxes which must be addressed. This is a positive step that must be implemented immediately. Although the government continued to provide fiscal and policy support to the real estate sector, it is important for the government to lay the foundation which will provide a strong impetus for demand generation and growth in order to regain the pre-COVID momentum. Policies must be enacted that address raw material price escalations, input tax credits, and reduction in GST rates.”

Mr. Rohit Gera Managing Director, Gera Developments

“The scale of the impact of the pandemic is indicated in the fiscal deficit being at 9.5% of GDP for the year. Given the challenges, the Finance Minister has done a good job with regards to focusing on pushing the growth drivers of the economy. The push of capital expenditure is positive as is the disinvestment as well as monetization of assets to generate revenue for the government.  Record GST collections in the last few months as a result of simplification and increased technology led vigilance will continue to help boost revenues for the government.

With regards to the real estate sector, the government has continued on its stated path of doing away with sector specific sops and in light of this, the extension of the interest rate deduction for home buyers as well as an extension of tax holiday for affordable projects by one more year is welcome.
Simplification of processes and rules for the SME segment will help ease the cost and efforts of compliance which is very good for the SME sector.”

Mr. Aditya Kushwaha, CEO & Director, Axis Ecorp

We welcome the first digital budget presented by the Hon’ble Finance Minister. The budget is largely focussed on healthcare and infrastructure, which will have a ripple effect on the development in the other sectors including real estate. The finance minister has also given special importance to human capital. Steps taken in this direction in conjunction with growth in infrastructure will lead to an increase in the disposable income of people which could bring a good scope for investment in real estate.
 
In the Annual budget for 2021 too,  we can see the Government’s focus on affordable housing. The deduction on payment of interest for affordable housing has been extended by a year. This move will improve customer buying behaviour. At the same time, to boost the investment coming via the NRI route, the taxation has been simplified which will incentivise NRIs to invest in our country as they will get a tax rebate on the rental income. This move will also give a boost to holiday homes and commercial real estate in the country.

Furthermore, there have been relaxations offered in real estate transactions, capital gains, business profits, and rental income which in turn will uplift the real estate sector.

Mr. Vinod Kumar Gupta, Managing Director, Dollar Industries Limited

The pandemic has affected all sectors globally and the textile industry has been no exception to the same. The focus of the Government in this Budget 2021 is on expenditure wherein 34% is on capital infrastructure which in turn is going to generate employment. Even though the budget is focused on expenditure the fiscal deficit is kept below 10% which will be bought down to 4.5% in 2025. The disinvestment and monetization reforms will help in economical development. Core sectors like Steel, Cement, Infrastructure, Insurance and Banks are big beneficiaries in the Budget. Long term roadmap on infrastructure and visibility on duties & taxes will make life easier for industries at large. The Budget of 2021 enables our indigenous textile industry to become globally competitive. This in turn shall make India a competitive manufacturing and exporting hub for the sector. The announcement of the set-up of 7 National Textile Park is one such step in that direction. There was no reduction/relief on personal taxation side, however, the good part is that we did not see levy of any additional cess. A welcome move by the Government is putting more trust on the taxpayer and reduction in compliance will lead to reignite animal spirit amongst industry and business community.  Overall, this is a pragmatic and growth-oriented budget and for the Indian textile industry it is a great step forward towards realising the end goal of ‘AtmaNirbhar Bharat.’

Mr.Anand Vilayannur, CEO & Co-founder, Tattva Mittal Group

“In these times of post pandemic stress, the budget expectations were higher than usual. However, this budget has kept its focus on recovering the economy and mainly the healthcare sector, which makes it one of the most significant budgets. Firstly, the extension by 1 year on payment of interest for affordable housing of Rs.1.5 lakh will be a great add on to help home buyers and the sector. In terms of tax relief, there has been no exemption nor any increase.  On a positive note for the entire construction and engineering industry, the increase on infrastructure capex next fiscal to 4.39lakh Crore shall turn out to be a great help. The new healthcare scheme under Atma Nirbhar Swasthya Bharat Yojana has been allocated about Rs 64,180 crore, which is the need of the hour, in the light of the corona-virus situation and the 2 vaccines process in the line.  Overall, this budget somewhat met the expectations. “

Vikram Chari, CEO- SmartOwner, Asia’s leading Real Estate Fintech firm

“At the outset the union budget 2021 seems to have its sights set on the long term with a major push towards infrastructure development and no major announcements or tax breaks that would have worked as an instant relief to the real estate sector. With a continued focus on boosting transaction volumes in the affordable housing segment, the tax breaks for both – developers focusing on this segment and home buyers, which were set to expire by 31st March 2021 have been extended by another year. The much-anticipated goods and services tax (GST) streamlining and the re-introduction of input tax credit (ITC), if implemented, would’ve introduced the liquidity that the industry was hoping for. The limit for tax rebate in housing loan interest for consumers also remains the same at 2 lakhs. The finance ministry has, however, targeted infrastructure development with the announcement of an allocation of 20000 crores for the capitalization of the development financial institution (DFI) for the long term debt financing of infrastructure projects. Along with this the enabling of debt financing by foreign portfolio investors (FPIs) for real estate investment trusts (REITs) and infrastructure investment trusts (INVITs), allocation of funds for metro rail projects across the country reinforces the government’s intention to push infrastructure development in the country. What remains to be seen is the implementation of these announcements, which would have a positive impact on the real estate sector once implemented, albeit over a longer period of time.”

Mr. Nitin Gupta, Sr. Vice President,  Sales,Marketing and CRM, Mantra Properties

 “The 2021-22 Union Budget is indeed good news.  This budget is for growth for long term , inclusive growth for the economy as a whole.  I am glad that the government sees affordable housing as a priority and is acting accordingly. By extending the 80Ib tax benefit for developers by another year  the government has brought some cheer to home buyers, and I am sure they [home buyers] will definitely make the most of it. This would certainly boost the real estate sector as well. Exciting times ahead!”

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