Budget 2021: Capex in spotlight; foreign loan bucks for InvITs and REITs
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In the budget, the government sought to boost infrastructure as well as proposed debt financing of infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) by foreign portfolio investors.

But it largely maintained the status quo on affordable housing. Two years ago, the government had provided an additional deduction of interest, amounting to Rs 1.5 lakh, for loan taken to purchase an affordable house. This has now been extended by one more year to 31 March 2022.

“This will continue to benefit first-time homebuyers,” real estate consultancy JLL said.

The concession has also been extended for developers of affordable homes. The supply of housing projects in the range of Rs 40-70 lakh has gone up in the last few years. The step will further boost the segment.

As per JLL, nearly one-third of the newly launched projects across the top seven markets in India catered to affordable housing in 2020 and this share is only expected to increase. 

The government has over the years tried to push affordable housing through tax concession, regulatory reforms and tax holiday.

In the wake of migration of migrant workers during lockdown, it gave birth to the affordable rental housing scheme. In the budget today, the government proposed a tax exemption for notified affordable rental housing projects.

Push for emerging vehicles

In a key move for InvITs and REITs, the budget proposed debt financing by foreign portfolio investors.

The REIT market is still nascent in India and the ecosystem has seen the listing of two platforms – Embassy REIT and Mindspace REIT. Brookfield REIT is all set to list this week.

“The unlocking of value of real estate assets, especially in the office segment, will provide growth capital for the sector and investments in infrastructure projects will have access to low-cost offshore funds,” said Anshuman Magazine, chairman and chief executive, India, Southeast Asia, Middle East and Africa, CBRE.

Also, the finance minister today made dividend payment from REIT and InvIT exempt from TDS (tax deducted at source). 

Moreover, “I propose to provide that advance tax liability on dividend income shall arise only after the declaration/payment of dividend. Also, for foreign portfolio investors, I propose to enable deduction of tax on dividend income at lower treaty rate,” she said.

Infra big bang

The budget saw an infrastructure push -- monetisation of land by public sector enterprises, infrastructure development, thrust on roads and highways.

The capex allocation of Rs 5.5 trillion for 2021-22 means a 35% rise over a year ago. Compared with 2020-21 revised estimates, the growth stands somewhat lower but still strong at 26%.

"The government’s focus on capital expenditure and infrastructure development will be a shot in the arm for warehousing and logistics,” said Anshul Singhal, managing director, Welspun One Logistics Parks.

“The proposed development finance institution will act as a provider, enabler, and catalyst for infrastructure financing. A planned boost to road infrastructure and seven port projects will aid in job creation and income generation,” he said.

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