Publication: 99acres, 29th Jan 2021
The year 2020 proved to be a defining period in the history of mankind as the COVID-19 pandemic dealt a severe blow to the normal course of life. It ravaged nearly all industries, and real estate was no different. Hence, in the forthcoming Budget 2021, the realty industry expects some extraordinary measures from the Government that help the sector take a road to recovery.
Amid the COVID-19 led chaos, the only silver lining was the Government providing fiscal and policy support to the real estate industry. Nevertheless, given the looming uncertainty, it seems that the ample policy support is still a requisite for the sector’s speedy recovery.
Outlook for 2021
Multiple measures were announced in 2020 to combat the pandemic’s impact on the overall economy and the real estate industry specifically. The measures introduced were quite proactive and appreciable. However, given the intensity of the prevalent issues in the sector, these steps were quite insufficient. The housing sector needs targeted steps to strengthen the demand. Hence, this year the expectations are likely to go beyond the usual single-window clearance and industry status.
Apart from affordable housing, the Budget 2021-22 needs to focus on the larger market. Now, more than ever before, homebuyers and investors are seeking focused tax incentives to purchase properties. Moreover, developers’ liquidity woes must be addressed to forestall future market mayhem in light of the pandemic’s ramifications.
Following are the real estate expectations from the upcoming Budget 2021:
The Government needs to rationalise the Goods and Services Tax (GST) rates to minimise ambiguity. GST collections witnessed buoyancy recently, which displays a monumental shift from the unorganised to the organised sector. To further encourage investors’ participation and collections, rates need to be brought down, and the number of tax slabs should be reduced.
Even if it is for a limited period, tax waiver under GST will bring down the overall property cost. This will effectively boost the demand for under-construction homes, which have been slackening since long. Funds from buyers can help developers accelerate project construction, reducing their reliance on financial institutions.
Greater incentives for investments in housing
Although real estate is an important segment that drives our economy, property developers and other stakeholders fail to get adequate funding from major banks, Non-Banking Finance Companies (NBFCs) and other financial institutions at an affordable cost. Since the profit margins for housing projects continue to be very low, the upcoming budget needs to incorporate some measures in addressing this challenge.
Reduce stamp duty
Stamp duty is a high cost incurred during the sale and purchase of a property. The Maharashtra government had reduced stamp duty on properties from five percent to two percent until December 2020. After December 2020, the government has levied three percent stamp duty on residential properties until March 2021. This is a good move and needs to be adopted on a national level.
The successful implementation of these measures would go a long way in reviving the housing sector. By resolving the liquidity crisis and providing necessary tax incentives to stakeholders and relaxing norms, the Government can pave the road for real estate recovery and progress.