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Indian Real Estate: The Road to Recovery

The Finance Minister’s digitally presented budget struck a good balance between growth and fiscal foresight for the Real Estate sector.



The Finance Minister’s digitally presented budget struck a good balance between growth and fiscal foresight for the Real Estate sector.

With the COVID crisis that has lasted almost a year now and with changing economic trends worldwide, India is no exception. In this scenario, any additional tax burden due to the pandemic would have been an added stress for taxpayers.

So, it was great to hear the Financial Minister (FM) announce no changes in the tax structure and manage it with planning and government resources. This not only provided relief to the pandemic-hit common man and MSME businesses but also shifted the focus more on driving economic recovery.

Real Estate as an industry also welcomes the proposed easing of InvITs (Infrastructure Investment Trusts)/REITs, which has immense potential for boosting demand both globally and domestically, thus increasing overall funds available for the sector. This increased access to more debt capital will provide additional means for asset acquisition, which could lead to the rapid closing of lower-cost transactions.

The government has also announced the establishment of an Asset reconstruction and management company, for stressed assets of banks. The Reconstruction and Management Company will be set up to consolidate and take over current stressed debt and then manage and offload said assets to Alternate Investment.

This  will  help in quicker resolution of non-performing assets. Also, the Tax exemption for notified affordable rental housing projects till FY 2022 and the additional interest extension by a year for loans taken for the purchase of an affordable house, will set the growth trajectory of the segment. This will in turn be instrumental in fulfilling the Govt’s mission of ‘Housing for all’.

The Indian real estate industry currently contributes an estimated 8% to the nation’s GDP. By 2025, the real estate sector will account for nearly 13% of the country’s GDP, with office spaces, retail and warehousing accounting for the majority of the growth. The sector at large is witnessing a comeback with momentum due to the high residential sales across the country. Over time, we have also witnessed an increase in the investments in commercial real estate, most of which have been due to REITs and shared ownership models. The sector also hopes that all benefits which will be extended under REITs will also extend to fractional ownership models thereby encouraging more investments. 

According to most industry reports, the residential real estate sector faced a lot of challenges pre 2020. However with the pandemic induced work from home scenario, the way consumers look at owning a house has certainly changed.  The lockdown last year, made potential home buyers revisit the importance of owning a home and the demand witnessed by residential real estate in 2020 has served as a catalyst in paving the way for the sector’s revival and rapid development. There has also been an increase in investments by NRIs across various categories of residential section of the industry.

Developers are also looking forward to access funds, along with longer repayment cycles and rational capital supply to boost liquidity and help the sector at large. A crucial task over the years has been for the Real Estate sector to be given an ‘industry’ status. This would have a three-fold benefit, wherein the sector will be able to attract more equity investments, acquire loans at low interest rates and refinance debts. 

All in all the budget seems very promising as a whole, and we as a company have a positive outlook towards its overall impact on the Real Estate Sector. 

DISCLAIMER: The views expressed are solely of the author and does not necessarily subscribe to it. shall not be responsible for any damage caused to any person/organisation directly or indirectly.

ALSO READ: Homebound NRIs Provides A New Lease Of Life To The Real Estate Sector


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