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Affordable Housing Expectations From The Union Budget 2021

Activities of land use regulation and permissions are the main cause of delay in real estate and housing projects. The process should be fully digitalized and timely clearances of the permission should be ensured. T

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The nation has held its breath as it is that time of the year again, the much anticipated Union Budget will be presented by Finance Minister Nirmala Sitharaman on 1st February 2021. Unlike every other year, this year the bar of expectations is high, the Indian economy saw its lowest dips in the year 2020 owing to the Coronavirus pandemic but now with the new vaccination drive and the steady stability that it promises, the people look at the Union Budget in want of remedies, grants, relaxation, tax cuts.

One of the sectors that has been hit a little too adversely was real estate. As if attaining affordable housing wasn't already a tough nut to crack, the pandemic made it more difficult. there are quite a few expectations from the National Budget 2021 for affordable housing as elucidated.

1. Cuts in Raw Materials cost

The cost of all raw materials saw a steep rise by 30-40% because of COVID-19 protocols and production cuts. The production cut has in turn increased the cost of Steel, Cement, PVC & HDPE resins which are the backbone of any infrastructure and real estate. An increase in the cost of raw materials directly increase the capital and cost of finance. This situation has brought a severe crisis for the infrastructure companies. The Modi government is expected to keep a stringent check on the cost fluctuation as per market conditions, not with the RBI basis points. Otherwise, many contractors will face bankruptcy and many will lose jobs. When the raw materials cost goes down, a sharp increase will be seen in infrastructure making affordable housing easier.

2. Low Interest rate, subsidies and Easy Finances

A Lower interest rate, easy finances, and subsidies in direct & indirect taxes could be a good option to get desired life for construction companies and real estate developers. Not only will it help the lower scale contractors to be "Atmanirbhar", it will promote the Make in India policy. It will also become easy to attain housing loans and start new business which in turn will stabilize the cycle and cash flow in the economy.

3. Grants and Assistance projects

Projects like DMIC can play a vital role in generating employment which in turn directly increases per capita income. These projects if implemented in full force will accelerate employment and bring more liquidity to the system that has currently dried up. It will bring the work force back to the cities while achieving the main goal of DMIC.

4. Revised land rates

Circle rates of land are expected to be revised as per the current market rates in urban and rural areas. The gap between circle rates and the market price is 1:20 in ratio. It will help wipe out black money and will multiply the stamp duty collection to the government exchequer. The real cost of land will help the developers to get adequate finances from legitimate sources to fund their projects. Not to forget the direct relief it will bring to the middle and lower middle class to attain affordable housing not only for residential but also investment purposes.

5. Digitalized regulation

Activities of land use regulation and permissions are the main cause of delay in real estate and housing projects. The process should be fully digitalized and timely clearances of the permission should be ensured. The red tapism in the system not only hampers the process but sometimes puts off investment altogether. A digitalized system will minimize the interest cost on capital as real estate and infrastructure both are capital intensive businesses.

6. Simplified process

RERA has restored faith in the real estate business but it should be simplified unlike GST. The process and standard compliances should be simplified. Each sector should have specific plots, residential buildings, industrial plots have unique characteristics and should be considered individually and not under a similar label.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Ambrish Parajiya

Director, GAP Associates

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