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Expected Boost in the Real Estate Sector in 2021

Expected Boost in the Real Estate Sector in 2021

The potential boost in the real estate sector in India has resulted in many citizens wondering how long this boost will last and whether it is the right time to invest in the real estate sector. Although this information can be found out by reading several different articles on the internet, we compile all the answers to your quandaries in this article to save you the time and effort of scrolling through a Google page.

Union Budget 2021

In 2021, Nirmala Sitharaman, the Finance Minister of India, announced a few amendments to be made to India’s budget to account for making real estate in India affordable1. Since then, these changes have swept the nation whole with its efficient layout and overall organization. The following points below detail the highlights of the new budget appraisal with regards to real estate.

  1. Tax Holiday :
  2. A tax holiday refers to an incentive program run by the government whereby, for a certain duration, a company or individual will not have to pay tax or will reduce the tax they generally have to pay. It is set by the government to encourage economic activity and stimulate foreign investment. According to the 2021 Union Budget, exemption from profits can be availed by developers engaged in the affordable housing business on or before 31 March 20221. In order to incentivize startups in the country, there will be an extension for tax holidays in addition to a capital gains exemption till 31 March 20222.

  3. REITs and InvITs :
  4. Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) will now be open for investment to foreign portfolio investors as well1. The increase in access to these trusts will increase the sources of capital to the foreign investors and, thereby, augment funds in real estate and infrastructure.

  5. Sale of Residential Property :
  6. Exemptions from long term capital gains that are accounted for during the sale of residential properties are now exempted if any net consideration derived is directed towards the subscription of shares of a start- up company2.

  7. Safe Harbor Limit :
  8. The transaction value of real estate is now 10% higher than the assessable value to promote an environment where developers feel the need to liquidate inventory at lowered prices. The safe harbor limit is now 20%5.

Affordable Housing Projects

Yes, the Union Budget does account for several changes this year but are there any ongoing housing projects to support it?

  • Pradhan Mantri Awas Yojana Urban (PMAY-U) :

PMAY-U is an initiative under the Housing for All scheme established by the government of India where a loan is given to an individual at a subsidized rate so that they can afford the purchase of a good property. The focus of this project is to empower women in India through real estate and, therefore, a mandatory provision of this project is that a female must be the owner or co-owner of the property built under this initiative. There are two main features that an individual should bear in mind with regards to this project- a 6.5% interest rate subsidy will be dispensed to individuals who take housing loans6 (with a loan tenure of up to 20 years) and, all the technologies used to build these affordable housing properties are sustainable and eco-friendly.

Your eligibility to avail the benefits of this initiative is dependent on your total household income group.

Group Household Income
Middle Income Group-II (6) Rs. 12 lakhs to Rs. 18 lakhs
Middle Income Group-I (6) Rs. 6 lakhs to Rs. 12 lakhs
Low Income Group (7) Rs. 3 lakhs to Rs. 6 lakhs
Economically Weaker Sections (7) Up to Rs. 3 lakhs
  • Light House Projects (LHPs) :

Established by the Prime Minister of India, Narendra Modi, this project involves building over 1,000 houses in six different sites across six states in India within a duration of 12 months8. The goal of this project is to ensure that housing is available for Indian citizens that are made of earthquake proof and environment friendly materials. Factoring in the local climate and ecology, this project will involve the construction of buildings that are strong and economical. The carpet area covered under this project will be around 34.5 square meters. 14 storey towers will be constructed as well by reputed engineers with an area of 415 square feet per flat and 1,040 flats in total8.

Conclusion

After researching into some professional opinions and reading up on the long term forecasted trends of these initiatives, we can conclude that affordable housing paints a bright future for India. Because of the initiatives mentioned in this article, real estate now contributes as much as 8% to the nation’s GDP9 and is responsible for generating employment opportunities in the country as well. One of the most praise-worthy attributes of this budget change relates to the provision of stimulus to REITs and InvITs with its exemptions on tax which permit the entry of foreign portfolio investors into debt financing. This lucrative investment will boost the flow of funds into the real estate sector in India. PMAY-U is also a notable government scheme which will not just boost the economy as a whole but will also help below poverty line individuals to procure affordable housing.

Sources

  1. https://www.ndtv.com/business/budget-2021-government-extends-eligibility-period-for-claiming-tax-holiday-by-one-more-year-2362098
  2. https://www.ey.com/en_in/alerts-hub/2021/02/real-estate-sector
  3. https://www.livemint.com/news/india/pradhan-mantri-awas-yojana-u-govt-sanctions-construction-of-56-368-houses-11614073750031.html
  4. https://www.bankbazaar.com/home-loan/pmay-urban.html
  5. https://www.livemint.com/budget/news/realtys-home-truths-11612206875937.html
  6. https://www.hdfc.com/housing-loans/pradhan-mantri-awas-yojana-clss
  7. https://homeloans.sbi/pmay
  8. https://www.jagranjosh.com/general-knowledge/what-are-light-house-projects-lhps-know-the-details-of-project-under-ghtcindia-1610024975-1
  9. https://www.financialexpress.com/money/budget-2021-hits-and-misses-for-real-estate/2187721/
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