Real Estate & Union Budget 2021

After a roller coaster year of the pandemic, lockdown, WFH, online classes and social distancing, the new year 2021 began with the hope of an effective vaccine which would make it possible for us to return to our somewhat old routine. India celebrated its 72nd Republic Day in a subdued manner; however the first Budget of the year was presented by Nirmala Sitharaman, Union Minister of India on 1st February with quite fanfare on an iPad instead of the Bahi Khata in the historic budget briefcase, cementing the digital age for India. The focus of the Budget this time is on the privatisation of State run firms, banks & an insurance company and asset creation to propel the nation out of the Covid slump which has greatly hampered growth in all aspects.

Let’s look at some of the highlights of the Budget 2021 with respect to real estate:

• There were no major changes in the tax rates but for home buyers it is the perfect time to buy a house as home loan rates and property prices both are down and states such as Maharashtra and Karnataka have also slashed stamp duties. Home buyers also get attractive tax breaks which would make the loans and interest rates easier on the pockets.

• The principal or loan amount is allowed as a deduction from your gross total income subject to overall cap under Sec80-C with other eligible investments of Rs. 1.5 lacs.

• To reduce tax liability, interest payable on self occupied property is subject to maximum deduction of Rs. 2 lacs under income from house property and can be set off against other incomes like salary in the same year. But the construction or acquisition should have been completed within 5 yrs from the end of financial year in which loan was taken or else the deduction will be limited to Rs. 30000.

• Deduction of Rs. 1.5 lacs for interest on loans for affordable houses valued upto Rs. 45 lacs from taxable income under section 80EEA has been extended for loans sanctioned from April 1, 2019 till March 31, 2022. Only those who do not own any other residential property on the date of sanction of loan can avail this benefit which is over and above the Rs. 2 lacs deduction on interest on home loan under Section 24 of the IT Act. So if a home buyer avails a loan of Rs 40 lacs for a Rs 45 lacs home, this scheme would actually cover the entire interest on that loan.

• The above mentioned benefit will also bring down the effective interest rates to around 5.5% from the existing 7% which is beneficial for current and future home buyers.

• If an individual has rented out his/her property, the difference between net rent (after adjustment of municipal taxes) and the entire interest on housing loan is the loss from house property which can be set off upto Rs. 2 lacs against other incomes like salary and can be carried forward (if not set off) for 8 assessment years.

• Individuals or HUFs will get an exemption on long term capital gains arising from transfer of a residential property sold on or before March 31, 2022 if the consideration is invested in equity shares of eligible startups.

• An extension of one year has been proposed on the 100% tax holiday for real estate developers of affordable notified rental housing projects which have been approved on or before March 31, 2022. This will help the Govt. in achieving “Housing for all” by 2022.

• Customs duty on steel and marble & travertine blocks has been reduced to 7.5% and 40% respectively due to the exemption in social welfare cess for the latter. This is a welcome move for real estate developers and homeowners who would like to construct or renovate their abodes.

• Rs. 1.18 lac crores have been allocated to the road transport and highway ministry for 2021-22 to build a record 11000 km NHs. The roadmap includes 8 major projects including Delhi-Mumbai, Bengaluru-Chennai, Delhi-Dehradun, Kanpur-Lucknow and Delhi-Katra 4 and 6 lane expressways which will have advanced traffic management systems with speed radars, variable sign boards and recovery vans with GPS. This is the advent of smart cities which are highly advanced and aesthetically pleasing.

• The Delhi-Meerut RRTS also got a major boost as Rs. 4472 crore were allocated to NCRTC which is executing the project. Construction of the 82 km corridor is in full swing and work has already started between Sahidabad and Duhai and some parts of Delhi. This will create better connectivity among these cities and travelling for work or leisure would be a breeze.