Commercial real estate industry was one of the major affected sectors during the COVID-19 outbreak. For the same reason, the CRE industry waited for the Union Budget- 2021 presented by Finance Minister Nirmala Sitharaman with high expectations. Did this Union-Budget pave the way for recovery from the pandemic-caused negative impact on CRE? Let’s find out what the Union Budget had in store for CRE.
- This year Union Budget announced Rs.54,581 Crore budget for Ministry of Housing and Urban Affairs.
- Funding to Metro Rail projects and deployment of two new technologies, namely, MetroLite and MetroNeo, are expected to bring changes in CRE as well. Well-connected areas will gain value and this land appreciation will help the stakeholders and investors to a large extent.
- This Budget announced that debt financing of Infrastructure Investment Trusts(InVITs) and Real Estate Investment Trusts(REITs) by Foreign Portfolio Investors will be allowed by making suitable amendments in relevant legislations. This is an important announcement for CRE as it will make finding access to finance to InVITs and REITs more hassle-free and easy. It is a big opportunity to grow funds for the infrastructure and real estate sector.
- Similarly, REIT is a feasible option for people who intend to invest in a property in fractions to earn a rental income without the concerns of property tax, maintenance charges, etc. A premium commercial property as such might be illiquid. But owning units in a REIT brings you benefits of owning a commercial property and instant liquidity.
- Another important announcement made by Nirmala Sitharaman was that, “The dividend paid to Real Estate Infrastructure Trusts or Infrastructure Investment Trusts (REIT/InvIT) shall be exempt from TDS”. This comes as a huge relief to taxpayers. As per FM, the advance tax liability on dividend income will only increase after the declaration or payment of dividend.
- The government had abolished the Dividend Distribution Tax(DDT) in the last year’s budget inorder to incentivise investment. But they have exempted the dividend payment to REITs/InVITs from TDS this year for the ease of compliance. Along with that, FM has also allowed deduction of tax on dividend income at lower treaty rate for Foreign Portfolio Investors. These steps will make the funding process easier enabling a mention-worthy improvement in the commercial real estate sector.
- The Union Budget has initiatives to empower unorganised labour force, especially the migrant workers. The minister has proposed to launch a portal to collect necessary information on gig, construction-workers, buildings to provide these migrant workers with housing, health, skill, Insurance, credit, and food schemes.
When the allotment of massive capital amounts to improve national highway projects, roads, and other infrastructure has indirectly helped the CRE, the reforms that uplift REITs and InVITs funding have directly helped the CRE industry. New investments in commercial real estate like fractional investment on CRE properties are still going profitable amidst the pandemic. Yield Asset, the pioneers in commercial real estate goes on to be the most trusted commercial property investment platform for secure and high-yielding investments. Moreover, the Union Budget of the year 2021 has also given a boost to such new investment tactics. Let us wait and see how these reforms will help in improving the growth of the real estate industry in the near future.
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