The theme of this year’s budget was largely held around Covid-19, economic recovery, and growth. After the Covid-19 pandemic, the real estate sector also had high expectations from this union budget 2021. 

Things you should know from Union Budget 2021 announcements

Let’s read how real estate is going to be after this union budget announcement.

The government has kept affordable housing in their priority areas. There was a scheme of affordable housing where the government provided an additional deduction of interest on a loan taken to buy an affordable house. Now, this scheme is extended till March 2022. This will definitely promote home buyers to buy their own houses.

For promoting this affordable housing scheme and getting a good supply, the government is also giving tax holiday to these affordable projects( till March 31, 2022) which will help builders to make projects affordable.

Furthermore, to promote the supply of affordable rental housing for migrant workers, FM proposed to allow tax exemption for notified affordable rental housing projects.

For the primary sale of residential units, the government will incentivize the home buyers and real estate developers by increasing the safe harbour limit from 10-20%.

For unorganized labor 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.

Also, this time the government has allotted 545k cr to the infrastructure of the health that means labs, and hospitals infrastructure. Which will increase the chance of the big real estate deals.

Customs duty on steel is reduced to 7.5% and will create some space for real estate developers who may not be in a position to increase prices immediately.

Debt 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 incentivize investment. The dividend was made taxable in the hands of shareholders. Now, in order to provide ease of compliance, FM proposed to make dividend payments to REIT/ InvIT exempt from TDS.

Further, as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax, FM proposed to provide that advance tax liability on dividend income shall arise only after the declaration/payment of dividend. Also, for Foreign Portfolio Investors, FM proposed to enable deduction of tax on dividend income at a lower treaty rate.

Certain exemptions on facilities to current and former members of the Union Public Service Commission and the Election Commission such as rent-free residence, conveyance allowance, and medical facilities are exempt from tax.  This exemption has been removed.

Developers were hoping for industry status to be provided to the real estate sector and were also hoping for Input-Tax Credit benefit.

Though the number of announcements regarding the real estate sector was few in union budget 2021, we hope for the best from the announcements.

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Wish you all the very best for the upcoming real estate investments and opportunities.