2021 Budget: Expectations from the Building Material and Real Estate Sector

2021 Budget: Expectations from the Building Material Sector

This is again the time of the year when everyone from the large corporate houses to small businesses to the common man look for the changes the new budget brings with it. Finance Minister Nirmala Sitharaman will present her third Union Budget on 1 Feb 2021. This time the expectations would be larger than ever before as it is the first budget after the COVID-19 pandemic. Also, the construction industry had dealt with a severe blow after the outbreak however they are now on the road to recovery. SURFACES REPORTER (SR) presents here the expectations of building material sector and real estate sector from the budget 2021. Take a look:

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Mr. Kamlesh Patel, CMD, Asian Granito India Ltd

Kamlesh Patel, CMD, Asian Granito India Ltd

“Inclusion of natural gas in the GST regime, Incentives for export and bringing tiles and sanitaryware in desired 12% GST slab could be the key growth triggers that the tiles industry expects from the budget.

Natural Gas (fuel cost) is one of the major cost components for the tiles industry and keeping it out of the GST regime is putting the tiles industry at disadvantage. It is high time that it should be brought under GST.

Tiles and sanitaryware industry is an integral part of the infrastructure and resonates with key government initiatives including Swachh Bharat Abhiyan, Make in India, and Housing for All and bringing it in the 12% GST slab from 18% currently will provide a much-needed boost and also help in building affordable houses.

Post-Covid, the World is looking at India with great potential to fill the demand gap. The incentive for the export of tiles must be reviewed and increased to boost exports.

Tiles industry in India is estimated at around Rs. 40,000 crore and growing at a healthy single-digit employing over 6 lakh people in direct and indirect employment.

The economy is still recovering from Covid hence FM must focus on policies that encourage new investment, expedite the Capex cycle aiming at generating more employment opportunities and roll out tax benefits for individual taxpayers so consumption can also get a boost.

Govt. focus on Infrastructure growth to be increased by encouraging new Investment from overseas also for boosting up Atmanirbhar program of Govt. in Tiles Sector growth.”

Also Read: Atmanirbhar 3.0: Income Tax Relief for Developers and Home-Buyers

Mr. B G Vyas, Kajaria Ceramics

B G Vyas, Kajaria Ceramics

(A) For the Real Estate sector:

i. GST waiver for a limited period for all under-construction projects.

ii. More incentives for the development of affordable housing/PMAY projects.

iii. Introduction of innovative liquidity measures to improve cash flow for developers.

(B): For Homebuyers

i. Increase in tax exemption under sec 80C fr current 2 lakhs to Rs 5 lakhs.

ii. Rationalize stamp duty and registration charges across India.

(C ): For Ceramic Industry:

i. The current GST rate on tiles is 18%. This is way more than the desired 12%.

ii. Even after 3.5 years of GST rollout, power and fuel are still outside GST ambit. The inclusion of gas under the tax regime is also vital.

Also Read: Is GST Favorable For Building Materials, Architecture & Design Services?

Himanshu Jindal, CFO, Orientbell Tiles

Himanshu Jindal, CFO, Orientbell Tiles

 “Real Estate and construction activities, in general, have remained subdued for a prolonged period. Covid-19 and the unprecedented lockdown has, of course, further complicated the situation. In light of the same, would urge the Hon’ble Minister to consider input credit mechanisms for the real estate sector. Further, a reduction in GST for the ceramic industry as well as increased incentives for home buyers, and stricter laws around payments delays and defaulters might help the industry participants come out of the woods.”

Also Read: How a Tile Brand is transforming digitally | Orient Bell Limited | Brand Buzz | Surfaces Reporter

Vikas Chaturvedi, CEO of Xanadu Realty

Vikas Chaturvedi, CEO of Xanadu Realty

"Real estate in India is on a path to recovery since the initial wave of pandemic-induced lockdowns, thanks to short-term measures such as the reduction in repo rate by the RBI and the subsequent decrease in home loan interest rates. However, to ensure that the sector continues to register strong growth in the long run, the government must make certain policy interventions to revitalize market demand and support players operating in the space.

Reduction in GST on construction materials will help bring down costs further. Extension of GST reduction benefits to ancillary industries will automatically lead to support to the Real Estate industry. From a buyer’s point of view, income tax relief such as increasing the deduction on Principal repayment under 80C for home loans will prove beneficial to the sector.

Measures such as relaxing stamp duty on property purchase and reducing the income tax on owning a second home will also boost consumption. Furthermore, the industry could use establishing more funds for the developers to initiate new large-scale projects for creation of residential townships and business parks, like the SWAMIH Fund is for the stalled affordable housing and brown-field projects. Implementing these measures will boost confidence amongst both consumers and real estate developers, enabling the sector to build on its robust FY 2020-21 Q3 performance and accelerate its recovery, which is extremely crucial to the economy where Real Estate can be a nearly 7% contributor to the GDP."

Also Read: Construction, Auto, Pipeline projects have picked up. The demand will continue, said Jindal Steel and Power, MD, VR Sharma

Dr. S Vasudevan, CMD, Ozone Group

Dr. S Vasudevan, CMD, Ozone Group

“The realty industry is one of the bellwethers of India's economy and contributes more than 8 percent to the Indian economy employing more than 30 million people. It is an important industry as it has a ripple effect on other ancillary sectors. Therefore, any measures taken to uplift the sector will have the potential to revive the overall economy. Over the past couple of years, the industry has been working towards fulfilling our PM’s vision of ‘Housing for all by 2022’. The Government has also taken proactive measures that are commendable, but given the present market conditions, the industry needs more focused measures to further bolster demand in 2021”.

Our Expectations from the Budget this year are:

  1. A regulatory authority especially for the cement and steel sectors to regulate the price and thereby curb the rise in construction cost and instances of cartelization.
  2. The Government should adopt a uniform policy across all states in the reduction in stamp duty for various instruments related to real estate transactions, for the next 18-24 months. This would definitely give a fillip to the homebuyers.
  3. Reduction in premiums for TDR, FSI, etc. to enable more cost-effective/cheaper products for all end users.
  4. Reduction in GST across all sectors of Real Estate, to bring down the overall property cost and push demand.

Mr. Abhishek Jain, Chief Operating Officer, Satellite Developers Private Limited

Abhishek Jain, Chief Operating Officer, Satellite Developers Private Limited

“After the adverse effects of the pandemic, the real estate sector has seen a steady recovery in the last quarter of 2020 backed by positive Government reforms, low-interest rates and stamp duty reduction. Now, to sustain the momentum, a lot is expected from the upcoming Union Budget 2021. Revising the tax exemption limit for individuals under Section 24 from Rs 2 lakh to Rs 5 lakh will help increase the purchasing power of the homebuyers. The sector hopes that they should also re-introduce GST with an input tax credit on under-construction properties that will help in bringing down the cost of construction resulting in reduced property prices in the market. Furthermore, the sector expects a GST waiver for under-construction properties in the housing sector. These reforms will push the demand in the sector and ease the prevailing financial crunch.

One of the major constraints for demand had been the affordability of homes. Various states had provided time-bound relaxation in stamp duty on housing purchase, which was seen to have a positive impact on demand and sales. The increase in the tax holiday available to developers under Section 80IBA to boost the affordable housing construction is another critical expectation along with the adequate liquidity support to fund the stalled housing projects. The budget could consider further steps to improve affordability. Decisions such as the removal of the Rs 45 lakh cap along with the extension of 1% GST will surely be a great pact for the affordable housing segment.

Also Read: Will Buying Homes Get Cheaper?

Being heavily dependent on government policies and regular cash flows, the sector constantly requires policy support for its speedy recovery and even functioning. Thus, the industry expects the government to unveil reforms that would infuse liquidity for this distressed sector.

To provide industry status is one of the long-standing demands of the real estate sector that will surely help in fundraising for the projects from various schemes. On the whole, the budget should focus on firm measures that would further reinforce demand in 2021.”

Sanjeev Agrawal, Founder, Orvi Surfaces

Sanjeev Aggarwal, Founder, Orvi Surfaces

"We are anticipating positive reforms to ensure smooth functioning of business related activities. ORVI is situated in a SEZ zone and owing to excessive regulation like rigid rules and increased paperwork, it gets challenging to conduct business with ease. There is an increasing need for eradicating irrelevant steps which make the process strenuous and add no value for entrepreneurs.

We hope the government works towards the establishment of Skill development centres for artisans as such centres in handicraft sector play a vital role in employment generation for artisans. Establishing training centres for artisans make them capable of employing their endangered art forms and create high quality products that are at par with global standards, thus making them more self-reliant. As artisans are helping preserve our indigenous art alive, we hope the government empowers them greatly by creating collective platforms /meeting grounds to bridge the gap between deserving artisans & entrepreneurs."

Sudarshan Lodha, Co-founder, Strata

Sudarshan Lodha, Co-founder, Strata

“Considering the real estate sector is the second-largest employer in the country and directly or indirectly, accounts for approx.10 percent of the GDP, it deserves serious attention in the upcoming budget. Within realty, commercial real-estate has been a watch-out sector for investors both overseas and back home owing to its strong fundamentals and resilience. The government should therefore consider measures to further encourage more NRI investments in the country. For instance, considering a reduction in the income earned from long-term capital gains would be helpful.

Owing to fractional platforms, affordable commercial realty is now a reality in India, and therefore for retail investors intending to invest in commercial assets, the government should consider a higher exemption limit. Alternatively, since both the interest income as well as dividend earned by investors are taxable as per their slab rates, the government should consider a waiver of dividend tax. These measures will help boost retail sales which in turn can offer a huge impetus to trade and economic activities. Considering personal loan is expensive, the government should also bring in a policy whereby retail investors can avail a loan seamlessly from banks at a reasonable interest rate for investment in commercial assets through fractional route.

Also Read: Is Real Estate Showing Signs of Green Shoots?

Besides, it is important to address investor sentiments while also addressing the challenges being faced by developers. For instance, considering a stress fund can help generate cash flow for developers thereby helping build the supply side of the industry.  Alternatively, encouraging banks and NBFCs’ to lend to commercial real-estate projects or take over and restructure stalled projects will also go a long way in kick-starting the economy. Similarly, for properties that are not sold but developed for leasing, GST at 18 percent should be reconsidered as it is a huge liability for the developers as it pushes the cost of construction and poses further challenges in the wake of a liquidity crunch.

Additionally, the Government should also consider incentivising alternative asset classes such as warehousing, SEZs’, data canters and co-working spaces to build momentum on both the demand and supply side.”

Sanjay Bhatia, Co-Founder, Freightwalla

Sanjay Bhatia, Co-Founder, Freightwalla

"In the year 2020, the pandemic brought global industries to their knees. The USD 160 billion Indian logistics industry was also not spared as it came to a standstill during the pandemic lockdown.  The industry faced many challenges in terms of clearance, processing, and movement of shipments. Few technology-driven businesses managed to overcome some of the EXIM industry's challenges during the pandemic.

The stumbling-blocks faced by the exporters and importers could have been avoided if the entire ecosystem was working digitally. There is a pressing need for a complete digital transformation of the industry to handle international shipments efficiently. Consider the case of customs that have taken part in their processes online. There are still many things that need to be re-moulded with advanced technologies.

Also Read: COVID Induced Work From Home Culture Is A Surprise Boon For India’s Women

We hope the union budget to announce suitable investments towards the digitization of the shipping and logistics sector. A leap towards the initiative will bring in transparency, reduction in cost, and better cost management. Digitization should also include implementing smart single-window clearance for smooth processing of shipments or approvals. Such initiatives will prepare us to tackle any untoward incidences in the future, like the current pandemic. Investments in Artificial Intelligence, Machine Learning, and BlockChain technologies can facilitate complete transformation. It can boost productivity in every sector, and style pretty effective and successful workflow

Further, the Union Cabinet recently approved a multimodal logistics hub proposal and set up industrial corridor nodes at Krishnapatnam and Tumakuru. We hope to see implementations of these at the earliest. It will facilitate the transportation of goods, thereby cutting travel time and making the system more efficient.

There is also an expectation that the proposed National Logistics Policy may get announced during the announcement of union budget 2021. We are optimistic that that will improve productivity and reduce logistics costs."

Mr. Chintan Sheth, Director, Ashwin Sheth Group

“Budget 2021 will be 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. However, the recovery has been a positive one, to say the least with profitable sales growth in the residential front due to the festive season, attractive schemes, and the consumers' assertive outlook to restart looking for homes. 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.

We are optimistic about the amendments and wish the budget addresses some of the critical issues, such as:

  • Speeding up infrastructure development to improve connectivity to various emerging micro-markets.
  • GST waiver on under-construction projects for under-construction residential development
  • Ease in the cash flow and capital generation options that will support the developers to complete the construction working in time 

Mr. Ankur Jain Group CEO, Group

Mr. Navin Makhija, Managing Director, The Wadhwa Group

Mr. Bhushan Nemlekar - Director, Sumit Woods Limited

Mr. Ashok Mohanani President, NAREDCO Maharashtra

Also Read: Maharasthra Govt Decides to Extend Zero Stamp Duty For Home Buyers Until December 31

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