The budget 2021 announcement has been a ready reckoner for industries across sectors. For house buyers in particular, low, and middle-income groups have benefited for the first time! The Government has rolled out a scheme of additional deduction of Rs. 1.5 Lakh for the year 2021-22, which are subjected to the fulfilment of certain conditions. With this amendment, the consumers who invest in household property will get a total deduction of 3.5 Lakh for an additional year. As per the general perception, consumers would believe that the wood price will also go down due to the announcement. However, if you look at it from an economist’s point of view, precisely the reverse is bound to happen.

A cascading effect

Due to the new scheme in the budget, the consumers will tend to buy more houses. This will result in increased demand for wood for various segments, including flooring, furnishing, roofing, etc. As per the general principle of economics, an increase in demand results in a rise in the price of any product or service. With the costs rising, ultimately, the demand should fall, but this generally does not happen. So eventually, who is gaining? The conditions are favourable for the government and the vendors as with a price increase; demand is also increasing in tandem, which means profitable business.

How is the government gaining? The government has forgone a tax of 10% as the relief is only available to the consumer of low and medium-income groups. Therefore, the tax relief will not impact the consumers who fall into higher tax slabs. On the other hand, the government will charge GST on the increased inventory supply at an increased price at a higher tax rate than what has been forgone, i.e., 18%. So, are the consumers losing? No, consumers would have to bear the “no deduction”, roughly having the same impact on their pocket.

How are consumers benefited? They are skipping the inflation, which will happen in 1 year Post the pandemic, assets aren’t performing well, so it is the right time for consumers to invest from a returns point of view, especially if they are looking to resell their assets. Additionally, vendors are coming out of the budget as winners as well. This looks like a masterstroke, resulting in a win-win situation for all the stakeholders.

A balanced, well thought out budget announcement

"The budget is well balanced and focuses on pushing local production levels along with boosting the MSME sector. The holistic approach has ensured that all areas, including Infrastructure, Research and Development, Healthcare, and Education, get adequate attention. In a bid to ‘simplify the complex world, spur growth and help India develop into a great country, we also join in to create a better place for all to live in". Says Prashant Goel, Managing Director at Resha Wood.

Additionally, while import duties were tweaked for over 20 products, including diamonds, garments and telecom equipment, custom duties for raw materials such as wood and hardboard used for furniture manufacturing has not been raised. The capital gain implications for the real estate developers have also been reduced, and the relaxation in stamp duty has also backed it. All this will result in increased demand for wood. So, what are you waiting for? Rush now and get your share of wood from