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February 25, 2021

Budget 2021– Debt financing in Real Estate to be a Game Changer

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Touted as one of the most vital budgets in recent times, expectancies from Finance Minister Nirmala Sitharaman’s  were flying high. For the Real Estate industry, the dynamics of the actual estate area and its stakeholders witnessed a considerable effect because of the Covid-19 pandemic; but, the enterprise professionals expect that the Union Budget 2021could pave the way for opportunity and recovery.

The real property zone, which is suffering from low demand, subdued sales, high stock, and fee stagnation in wake of the Covid-19 pandemic, expects Union Budget 2021to give impetus to the housing development sector, which might also yield fine consequences in the close future. In her second finances, Finance Minister  had furnished a few incentives to address each call for and supply within the zone. But lots need to be executed to restore the sector.

Certain measures were taken through the Government to convey a lift to the real property industry up to now including implementing Debt financing.

Debt finance is borrowed cash that to be paid back at a future date with interest. y. The types of debt finance encompass bank loans, overdrafts, mortgages, credit cards, and system leasing/lease buy. Certain benefits of Debt financing are:

  • Maintaining possession – unlike equity financing, debt financing gives you the entire control over your business. As a business owner, now you do not need to answer to investors.
  • Tax deductions – in contrast to non-public loans, interest expenses and costs on a commercial enterprise mortgage are tax-deductible. This is a huge incentive for debt financing.
  • Retaining income – your most effective obligation for your lender is making payments inside agreed time frames. You do not need to percentage your enterprise profits.

As the annual budget is an important event that every sector looks forward to. The budget has an impact on each market and gives us a peek into sectors that could potentially benefit from it. The Union Budget 2021 has more to shoulder, as it has to balance the impact of Covid-19 and the subsequent lockdown. The Budget has already garnered much attention as the Finance Minister said that this Budget is unlike any other. It also took another historic step by going completely paperless this year. The Union Budget 2021 is expected to be a major step towards reviving the economy hit due to the pandemic. Healthcare is expected to be in focus, followed by real estate.

Both, the top builders in Mumbai and buyers hope that the upcoming Union Budget will introduce reforms like tax SOPs and correction in prices, which will further benefit and stabilize the real estate industry. The industry expects 1% GST for affordable housing to be extended by another fiscal year along with the removal of Rs. 45 lakh cap, which will eventually be a great deal for the affordable housing segment.

Debt financing of real estate funding trusts (REITs) and infrastructure investment trusts (InVITs) announced in the Union Budget is anticipated to be a game changer for the fundraising necessities in the real estate sector.

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