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Budget 2021; Finding equilibrium between reality and expectation

FM Nirmala Sitharaman presented her first paperless union budget and announced several measures for infrastructure and railway to give a much needed impetus. The budget proposals were aimed to strengthen the ‘Sankalp of Atma Nirbhar Bharat’. The focus, Sitharaman said, will be on 6 pillars, which include Health & well-being, Physical & financial capital & infrastructure, Inclusive development for aspirational India, Reinvigorating human capital, Innovation & R&D and Minimum Govt & Maximum Governance. There were prevailing expectations from the industry before budget declarations, some were met and once the budget was declared the clear picture came out. The budget tries hard to equilibrium between the expectation and reality of the construction sector. An analysis has been done on the expectatyions tha industry had, the actual provisions declared and what industry feels.

Budget 2021 expectations

Real estateThere was a widespread anticipation that the long pending-demand of industry status to real estate will be at Centre-stage in this budget, which will help the sector in raising funds in the market. It was crucial for the real estate sector with a series of developments across industries. The real estate sector faced multiple challenges due to reverse migration, stoppage of work, travel restrictions and less disposable income with potential buyers.

Infrastructure Infrastructure status to all residential projects was also expected, which currently is given only to affordable housing projects. Further, to make the sector get adequate funds to meet all the requirements, a nod for 100% FDI through automatic route in completed residential projects will be a major impetus for the sector. Moreover, government reforms like reduction in stamp duty, the extension of the project completion deadline, RBI Monetary Policy Committee’s decision to extend the co-lending scheme for NBFCs and HFCs led the industry on the path of recovery and boosted market sentiment further. 

Building materialsThe correction of inverted duty structure with reduction of import duties on critical raw materials of the Aluminium value chain in the upcoming union budget will go a long way in making India aluminium bridging the competitive gap it faces with respect to other major global Aluminium producers. With Aluminium production costs in India amongst one of the highest in the world, an immediate support pertaining to rationalization of power cost by reducing high cess on coal to support power intensive industries like aluminium is recommended. Steel was also expected to go through the change in rate provision.

Railway The allocation towards the railway budget was expected to be around ₹ 1.70 lakh crore and the gross budgetary support for railways expected to be around ₹ 75,000 crore. It was also expected that the allocation of safety funds for the railway network should be increased by 50 percent from the current ₹ 20,000 crore to ₹ 30,000 crore per year, that will help in boosting the safety infrastructure.

Budget 2021- Reality of budget

Real estateAffordable housing top priority for the government. In order to incentivise home buyers and real estate developers, it is proposed to increase safe harbour limit from 10% to 20% for the specified primary sale of residential units. In the July 2019 Budget, the government provided an additional deduction of interest, amounting to Rs 1.5 lakh, for loan taken to purchase an affordable house. FM proposed to extend the eligibility of this deduction by one more year, to March 31, 2022. The additional deduction of Rs 1.5 lakh shall therefore be available for loans taken up till March 31, 2022, for the purchase of an affordable house. Further, to keep up the supply of affordable houses, FM proposed that affordable housing projects can avail a tax holiday for one more year – till March 31, 2022. The budget proposals of Part A will strengthen the ‘Sankalp of Atma Nirbhar Bharat’. The focus, Sitharaman said, will be on 6 pillars, which include Health & well-being, Physical & financial capital & infrastructure, Inclusive development for aspirational India, Reinvigorating human capital, Innovation & R&D and Minimum Govt & Maximum Governance.

REITsDebt Financing of InVITs and REITs by Foreign Portfolio Investors will be enabled by making suitable amendments in the relevant legislations. This will further ease access of finance to InVITS and REITs thus augmenting funds for infrastructure and real estate sectors. In the previous Budget, the government had abolished the Dividend Distribution Tax (DDT) in order to incentivise investment. Dividend was made taxable in the hands of shareholders. Now, in order to provide ease of compliance, FM proposed to make dividend payment to REIT/ InvIT exempt from TDS.

Metro – A total of 702 km of conventional metro is operational and another 1,016 km of metro and RRTS is under construction in 27 cities. Two new technologies i.e., ‘MetroLite’ and ‘MetroNeo’ will be deployed to provide metro rail systems at much lesser cost with the same experience, convenience and safety in Tier-2 cities and peripheral areas of Tier-1 cities. Centre will provide funding to: Kochi Metro Railway Phase-II of 11.5 km at a cost of Rs 1,957.05 crore, Chennai Metro Railway Phase-II of 118.9 km at a cost of Rs 63,246 crore, Bengaluru Metro Railway Project Phase 2A and 2B of 58.19 km at a cost of Rs 14,788 croreand Nagpur Metro Rail Project Phase-II and Nashik Metro at a cost of Rs 5,976 crore and Rs 2,092 crore respectively.

Steel Finance Minister Nirmala Sitharaman in her Budget speech for 2021-22 said the anti-dumping duty (ADD) and countervailing duty (CVD) have also been revoked on certain steel products.

Finance Minister Nirmala Sitharaman in her Budget speech for 2021-22 said the anti-dumping duty (ADD) and countervailing duty (CVD) have also been revoked on certain steel products.“MSMEs and other user industries have been severely hit by a recent sharp rise in iron and steel prices. Therefore, we are reducing customs duty uniformly to 7.5 per cent on semis, flat, and long products of non-alloy, alloy, and stainless steels, she said.

LED LightsCustom duty has been increased on inputs and parts of LED lights or fixtures including LED Lamps from 7.5% to 10% and on solar lanterns or solar lamps from 5% to 15% The government on Monday proposed to raise import duty on solar inverters and lanterns or lamps but did not go ahead with its plan to impose basic custom duty on solar equipment across the board to boost domestic manufacturing.

Construction workersTo further extend our efforts towards the unorganised labour force migrant workers particularly, FM proposed to launch a portal that will collect relevant information on gig, building, and construction-workers among others. This will help formulate Health, Housing, Skill, Insurance, Credit, and food schemes for migrant workers.

Highway – FM announced highway works in various states including 3,500 km corridor in Tamil Nadu, 1,100 km in Kerala at investment of Rs 65,000 crore, 675 km in West Bengal at a cost of Rs 95,000 crore and 1,300 km in Assam in the next 3 years. Over Rs. 34,000 crore to be allocated for 1300 km of NHs to be undertaken in next 3 years in Assam, in addition to Rs. 19,000 crore works of NHs currently in progress in the State.Under the Rs. 5.35 lakh crore Bharatmala Pariyojana, more than 13,000 km length of roads worth Rs. 3.3 lakh crore awarded for construction:

RailwaysUnion Budget announced a new National Railway Plan for India 2030 with a total allocation of Rs 1.15 lakh crore for Indian Railways. For Railways Budget, the FM announced that Indian Railways will have a National Rail Plan for upto 2030. The Centre plans to bring down the logistics cost for industry to promote an Atmanirbhar Bharat. For the same, the Eastern and Western Dedicated Freight corridors will be commissioned by June 2022.

Aviation For the aviation sector, FM said that the next lot of airports will be privatized in tier 2 and 3 towns and cities. FM said that in FY22 outlay (budget estimate) for health & well-being is up 138%, and is at Rs 2,23,846 crore.

Power – 139 Giga Watts of installed capacity and Rs. 1.41 lakh circuit km of transmission lines added, and additional 2.8 crore households connected in past 6 years. Consumers have alternatives to choose the Distribution Company for enhancing competitiveness. Rs. 3,05,984 crore over 5 years for a revamped, reforms-based and result-linked new power distribution sector scheme. A comprehensive National Hydrogen Energy Mission 2021-22 to be launched.

Industry speaks on budget 2021

Anuj Puri, Chairman – ANAROCK Property Consultants

Considered ‘the Margaret Thatcher moment’ for the FM, Union Budget 2021-22 was literally a make-or-break event. The circumstances are unprecedented – it is the first budget presented after a pandemic which shattered the economy globally, and in India. The impact of the pandemic has been catastrophic with the early govt. estimates indicating a 7.7% contraction in FY 2020-21 – the biggest GDP growth plunge in over four decades. Expectations across sectors were at an all-time high, though the fiscal pressures on the finance ministry are nothing short of crippling.

As expected, healthcare got the highest priority in resource allocation and policy support including INR 64,180 Cr outlay under PM Atma Nirbhar Swastha Bharat scheme. It bodes well for healthcare facilities and wellness-oriented real estate. Further, FY 2021-22 capital expenditure outlay at INR 5.54 lakh crore to ensure that the target of becoming a USD 5 trillion economy by 2025 is well on track. This will positively impact infrastructure, connectivity of Tier II cities, and job creation for SMEs and MSMEs – thereby benefiting the target customers of affordable housing.

For the ‘Aam Aadmi,’ personal tax relief by way of tax rate cuts or favourably readjusted tax slabs topped demand and the FM failed to deliver on it. An upward revision in the deduction limit under Section 80C (at INR 1.5 lakh a year) was long overdue and increasing this limit would have increased disposable incomes, inevitably pushing up consumption. It would have also helped improve consumer sentiments across sectors – the real need of the hour.

As anticipated, affordable housing and rental housing got a big boost with the govt. extending the period for extra deduction of INR 1.5 lakh available for loans up to 31st March 2022. This will keep demand buoyant for affordable housing in 2021 as well. Further, the extension of the tax holiday for affordable housing projects for one more year will help bring in more new supply within this segment. As per ANAROCK Research, affordable housing already accounts for more than 35% of the supply across the top 7 cities in the country.

Infrastructure got a major push. Infra works proposed include building 8,500-km of highways by March 2022. There were big infra sops announced for poll-bound states including West Bengal, Tamil Nadu, Kerala and Assam. The govt. also announced the Bill to set up Development Finance Institution (DFI) providing INR 20,000 Cr to boost infrastructure projects. The Modi government has not lost sight of its USP of infra creation, which will help connect more areas and thus open them up for real estate development.  Customs duty on steel reduced to 7.5% will create some space to real estate developers who may not be in a position to increase prices immediately.

The announcement to set up 7 mega textile parks with plug-and-play facility in 3 years will unlock the potential of new markets for development and provide an impetus to real estate assets, including logistics and warehousing. Post the pandemic, the chances of NPAs growing are significantly high. The Budget announced the setting up of ARCs to help banks to cushion the impact of the pandemic. Besides setting up the long-awaited bad bank, the government will also infuse INR 20,000 crore into public sector banks as part of its recapitalisation plan.

All in all, the budget was broad-based with special emphasis on building robust healthcare infrastructure, physical infrastructure and affordable housing. It will result in job creation in the informal sector, which was severely impacted by the pandemic. Creating buoyancy in the job market will benefit the Indian economy in the long run. The focus on rural job creation will also give a boost to affordable housing, which will help increase housing demand in tier 2 & 3 cities.

Mr. Rohan Khatau, Director, CCI Projects Pvt Ltd – Rivali Park

“Government has rightly continued its focus on affordable housing projects. By allowing additional deduction of Rs 1.5 lakh on home loan interest for homebuyers and tax holiday for developers undertaking such projects by another year, it has ensured to create a right balance between demand and supply. The focus on infrastructure development and passenger transport facilities is one of the key areas to magnify real estate.”

Mr Ajay Kapoor, CEO, Adhiraj Constructions

The Union budget of 2021 clearly defined its intentions for a new and aspirational India. One of the critical pillars of the budget, infrastructure, achieved the much-needed progression and will continue to grow and expand. The budget’s focus continues to be on the infrastructure of roads, railways, ports, airports, and urban transport. With this growth, India is all set to break new barriers with respect to connectivity and ease of commuting. With the further inflow of funding coming with the ease of finance to InVITS and REITs will be a boon for the infrastructure and real estate sector.

Homebuyers sitting on the fence can take advantage of the extension of tax benefits on home loans up to FY22 and added extension exemption on the purchase of affordable houses. Middle-class taxpayers now have another year better to manage their finances and investment in their dream homes. Hardships for NRIs are also resolved with the removal of double taxation, allowing them to be stress-free while house hunting in micro markets of their choice.

On the other hand, builders will avail the tax holiday for another year till March 31, 2022 for affordable housing projects, along with the tax exemption available to them for affordable rental housing projects.

With minimum wages applicable to all, men and women workers from all categories can now work together with adequate protection. This move will amp up employment in the sector and boost proficiency and efficiency.

The nation-first approach will take India closer to become a $ 5 trillion economy in the coming years. We look forward to the necessary measures taken to correct other requirements from the industry.


The Budget certainly a significant shift in the government’s fiscal policy plan. Growth is high on the government’s priority list. The Budget proposes to support the economic growth by substantially higher outlay for healthcare, infrastructure development & other capital expenditure programs. In the Budget, the government has also announced some pragmatic proposals to fund the capital expenditure and infrastructure development projects. It proposes to set up Development Financial Institution (DFI) with initial equity contribution of Rs 20,000 crore with target to provide credit to tune of Rs 5 lakh crore to infrastructure projects over the next five years. Also to fund the capital expenditure, there is a clear intent towards monetisation of existing assets of public sector companies and attract foreign capital into Indian infrastructure space. Declarations are now made, we await applications.


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