In between the farmer strikes and covid-19 vaccine implementation phases, we just had the budget passed for the ongoing financial year. Real estate – which is the second biggest job creator in India has got some notable attention in the budget. Being one of the crucial economic engines, the Center has implemented positive reforms to welcome more investment into the sector. Real estate sector contributes as much as 8 percent to India’s Gross Domestic Product (GDP). By 2025, it is anticipated to contribute as much as 13 percent – hailing under the office space consumption (27 percent growth/year), retail spaces and warehousing sector. Let’s take at the positive implications that the budget has for the real estate sector.
One of the major incentives of the Budget 2021 was the extended or continued push for the affordable housing segment. Centre has announced tax benefits for affordable housing and for private investment formats including REITs (Real Estate Investment Trusts) and InvITs (Real Estate Investment Trusts and Infrastructure Investment Trusts). The financial minister has extended the tax exemption by another year, i.e. till March 2022. In a commendable incentive, the budget has implemented provisions for migrant workers to avail tax exemption for notified affordable rental housing projects, which will make rental homes more accessible for migrant workers.
The budget has proposed to allow foreign portfolio investors into debt financing of REITs and InvITs. This will make both REIts and InvITs a lucrative asset class of investment and help bring more participation or money flow into the real estate and infrastructure sector. The Centre has proposed indirect support measures that will fuel the infrastructure development and boost the overall value appreciation of the real estate properties. This will fuel more money inflow to the sector to make it the best positive time for considering real estate investments. The budget has called for re-introduction of Input Tax Credit (ITC) and other favourable GST reforms as well.
Commercial Real Estate Bounces Back in Delhi-NCR
According to a report surfaced in Moneycontrol, the net office space absorption in Delhi-NCR has recorded a jump of 416 percent to reach 1.02 mn sq ft in the last quarter of 2020. Despite the overall sluggish year due to the Covid-19, this survey hints at the reviving real estate market sentiment as business activities resumed and more leasing decisions were executed in Delhi-NCR. While Noida had a clear margin of 64 percent of the office space absorption, the millennial city Gurugram followed it with a contribution of 34 percent.
Luxury Home Sales Booms in Delhi-NCR
According to a survey appeared in Financial Express, the luxury housing sales has witnessed a lot of traction as people started to realise that it’s the ideal time to buy homes. Against the odds of a year on year dip, the pundits are predicting the residential sector to boom under the positive responses from NRIs and HNIs who are eyeing to target the post Covid quarters. However, the major driving force for the Delhi-NCR real estate will be the commercial property investments. Real estate pundits are inferring that any developments in the commercial real estate sector will have positive ripples in the Indian economy.