From an overall macro-economic perspective, the Finance Minister has delivered a ‘get well soon’ type of Budget. If we were to look at the ‘V’ shaped economic recovery and its future progress, it is powered by the Covid-19 vaccination programme.

Affordable Housing remains the Government of India’s favoured segment in real estate, going by the Budget proposals. As the Indian economy slowly but surely makes its way out from the challenged scenario, the Budget has the potential to accelerate the recovery — and economic growth will power enhanced offtake in real estate.

The reaction of the equity markets to India’s first such digital Budget having ‘no major direct taxation enhancement’ is welcoming. Similarly, the aggressive investment in infrastructure and enhanced public spend for infrastructure will not just reinvigorate employment and investment, but also fulfil the need for sustainable economic revival.

‘After consolidation, year of growth for residential segment’

No Covid tax

The one worry that was felt across the economy, of the Budget bringing in a Covid tax, was thankfully not a part of the proposals. The move to privatise two PSBs and one general insurance company is noteworthy, as is increase in FDI limit in Insurance to 74 per cent. The much-awaited proposal to set up a DFI should boost capex in the coming years. The revival in the economy seen in the past few months looks all set to be further enhanced with the various proposals. Tax buoyancy, successful divestments and quick monetisation of operating infrastructure assets remain the key to achieving the fiscal deficit target for FY 21-22.

Budget: Extension of tax benefits to boost demand for affordable housing

Towards social security

On real estate, proposals in the Budget reinforce the Government’s focus on affordable housing. While it does not specifically mention other segments of real estate, the hope is that positives from the Budget will impact overall real estate. For the home buyer, the extension of deadline till March 31, 2022, for the additional ₹1.5-lakh tax deduction given on loans taken to buy a house in an affordable housing project is welcome, as is for the developer whose affordable housing projects also get an extension for tax benefits, for projects completed till March 31, 2022.

Similarly, tax exemption for notified affordable housing for migrant workers has been proposed under Section 80 I B A of Income Tax Act and this will be notified in due course of time. This will be positive from a social security perspective, as affordable shelter will be provided to the underprivileged and migrant labour. Similarly, deduction on payment of interest for affordable housing being extended by a year will give a fillip to this segment.

Apart from the measures mentioned in the Budget, affordable housing in Maharashtra will be the gainer — not just that the Budget has positives but also that it attracts only 1 per cent GST and ₹1,000 as stamp duty.

From an industry perspective, setting up a long-term development financial fund is a good move, as it will create additional lending options and address the liquidity constraint that impacts real estate. The renewed focus on privatisation and recapitalisation of banks is important, again from the same perspective of liquidity constraint.

Infra stimulus

The one section where the Budget lacks is demand incentives, which needed support. Time-bound and proper implementation of the various measures tops the wish list of many Indians. As the Prime Minister pointed out earlier, the last year saw mini Budgets across the pandemic-impacted time frame. For real estate, especially segments other than affordable housing, the unsaid aspect is that similar steps may happen with more positives in the offing through the upcoming fiscal. Continued focus on ‘Minimum Government, Maximum Governance’ will enhance ‘ease of doing business’, leading to positives for not just the economy, but also for real estate.

The proposed stimulus in the form of enhanced infrastructure spend is spectacular — roads, ports, airports, gas pipeline, warehousing, metro lines, etc. This government spending will provide stimulus for GDP growth, and is laudable. Aviation gets a boost with tax holiday for aircraft leasing business in Gift City, as also tax exemption for relocating funds to IFSC will enhance the growth potential of the economy as envisaged through the Gift City.

This year’s Budget itself being in digital format, it continues the government’s strong focus on digital, with the announcement about setting up of a Fintech hub at Gift City. This has to be seen in sync with moves to enhance digital payments and use of Artificial Intelligence and Machine Learning, etc., in governance; these will give a fillip to creation of Digital India. These measures augur well for the economy, as also for real estate as an industry. To sum up, one needs to compliment the Finance Minister for coming up with Budget proposals that are positive and growth-oriented.

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