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Impact of Budget 2021 on Real Estate

Ramesh Agrawal (LL.B , CA) , Last updated: 10 February 2021  

Hon'ble Prime Minister Shri Narendra Modi has always put his focus on 'Housing for All'. Now the Finance Minister Smt. Nirmala Sitharaman made it clear in her Budget 2021-22 that affordable housing is the topmost priority of the Modi Government.

In the Union Budget 2021, Ministry of Housing and Urban Affairs has been allocated more than Rs 54,000 Crore for Urban Centers all over India.

Impact of Union Budget 2021 on Real Estate are as under: -

Safe Harbor Limit Increased for Primary Sale of Residential Units

To incentivize home buyers and real estate developers, it has been proposed to increase safe harbor limit from 10% to 20% for the specified primary sale of residential units.

Affordable Housing

In 2019 July Budget, the government provided an additional interest deduction, amounting to Rs 1.5 lakh for the loan taken to purchase an affordable house. The Finance Minister has given extension the eligibility of this deduction for 1 more year to 31st March 2022. The government will provide an additional deduction of interest, amounting to Rs 1.5 lakh for the loan taken up till 31st March 2022 to purchase an affordable house.

The Finance Minister has offered to allow tax exemption for notified Affordable Rental Housing Projects to increase the supply for migrant workers.

Impact of Budget 2021 on Real Estate


Enabling of Foreign Portfolio Investors in Debt Financing of InVITs and REITs by amending relevant legislations. This will help in finance to InVITs and REITs, augmenting funds for infrastructure and real estate sectors.

In the previous Budget, the government had abolished the Dividend Distribution Tax (DDT) to incentivize investment. Now, the Dividend has been made Taxable in the hands of shareholders. To do the ease of compliance, the Finance Minister has proposed to make a dividend payment to REIT/ InvIT exempt from TDS.

Further, the Finance Minister has relaxed the Advance Tax Liability on the dividend by saying that advance tax liability on dividend income will arise only after the declaration/payment of Dividend. Finance Minister proposed to enable deduction of tax on dividend for Foreign Portfolio Investors at lower treaty rate.


The government will work on raising public transport in the urban area through the expansion of Metro rail. 702 KM of the conventional metro is currently operational and another 1,016 KM of metro and RRTS is under construction in 27 cities.

Two new technologies 'MetroLite' and 'MetroNeo' will be deployed to provide metro rail systems at a much lesser cost with the same convenience, experience and safety in the cities.

Central funding will be provided to: -

  • Rs 63,246 Crore for Chennai Metro Railway Phase-II of 118.9 KM.
  • Rs 1,957.05 Crore for Kochi Metro Railway Phase-II of 11.5 KM.
  • Rs 14,788 Crore for Bengaluru Metro Railway Project Phase 2A and 2B of 58.19 KM.
  • Rs 5,976 Crore for Nagpur Metro Rail Project Phase-II
  • Rs 2,092 Crore for Nashik Metro.

Finance Minister Smt. Nirmala Sitharaman said that Infrastructure requires long term debt financing. For better infrastructure financing, a professionally managed Development Financial Institution (DFI) is essentially required to act for it.

A Bill to set up a DFI was introduced by FM Minister. A sum of Rs 20,000 Crore has been provided by FM Minister to capitalize on this institution.

Stressed Asset Resolution

Two types of companies i.e., Asset Reconstruction Company and Asset Management Company will be set up to consolidate and take over the existing stressed debt and then managing and disposing of the assets to Alternate Investment Funds and other potential investors for eventual value realization.

NCLT Framework will be strengthened to ensure faster resolution of cases, E-Courts system will be implemented along with alternate methods for debt resolution and the introduction of special framework for MSMEs.

LED Lights

Custom Duty has been increased from 7.5% to 10% on inputs and parts of LED lights or fixtures including LED Lamps and from 5% to 15% on solar lanterns or solar lamps.


Construction Workers

To formulate Health, Housing, Skill, Insurance, Credit, and food schemes for migrant workers, the Finance Minister proposed to launch a portal which will collect relevant information gig, building, and construction workers, among others. This is an extremely helpful initiative for migrant workers.

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