Budget 2021 & Real Estate

Sanjeev Kathuria(Founder, Author & CEO at Torbit Consulting) - February 14, 2021 - - 0 |

The Finance Minister, Nirmala Sitharaman, presented a very ambitious and forward-looking budget for 2021, making a strong statement to the world that India is open to reforms and is poised to create a better business and investment atmosphere for the world to look at.

The Govt has taken a decisive step to fuel growth by Capital Expenditure on Infrastructure, Healthcare, and Facility Building. It was also observed that Govt is ready to raise funds by monetizing land and other assets to mitigate the need for Capex, recapitalizing banks, and also handling the stress in banks and NBFCs

What did REAL ESTATE get?

  1. Affordable Housing in line with PMs vision of “Housing for all” was the priority area – additional deduction of interest amounting to Rs 1.5 Lakhs for a loan taken to purchase an affordable house extended to 31st March 2022. Affordable housing projects also got a tax holiday for one more year
  2. Debt financing of InVITs and REITs by Foreign Portfolio Investors. This will ease access of funds which can be utilized for Infrastructure and Real Estate Sectors
  3. Setting up of “ Development Financial Institution ” – This will cater to the need for long term debt financing.
  4. Setting up of “ Asset Reconstruction Company “ – Much needed to handle NPAs of banks and help stressed assets

My Understanding of Budget 2021 & Real Estate

I am thrilled by the Govt’s approach to handling the crisis and how tabled to take the country out of the health crisis and the economic crisis onto a growth trajectory. The thought process shows that the government is ready for privatization, debt financing, asset monetization, etc. Kudos to the central government for such a proactive approach.

The critical point is the execution of these policies, which has always been questionable.

Real Estate has not directly benefitted from the Budget, but I see many positives besides the ones mentioned at the start of the write-up.

  1. Capital Expenditure generates employment, which creates money that fuels demand. Housing will benefit from the demand creation
  2. Stressed Assets and Stressed developers both have been wanting resolution. The Budget has provided various ways by recapitalization of banks setting up of ARCs, DFI to create liquidity and clean balance sheets. This is long term positive
  3. Monetizing government land assets will create land availability at strategic places, which will cool of the inflation in land prices and make development feasible
  4. Affordable rental policy, especially for migrants, is the step in the right direction
  5. Finally, affordable housing where the maximum demand exists has got another booster shot, which will fuel sales and generate cash in developers’ balance sheet.

In Short, The Budget is all good, and I would rate it 7 / 10..

Disclaimer: Content and opinion expressed here is solely mine, and stems from my experience and observations of the industry.

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