The Union Budget 2021 has the potential to lay down a roadmap for sustained real estate growth for this decade.
Union Budget 2021-22 Expectations for Real Estate: As the world inches closer towards normalcy in 2021 with the beginning of the vaccination drive against COVID-19, the upcoming Union Budget 2021-22 has instilled a wave of optimism about real estate growth. India’s real estate sector has witnessed a series of conducive reforms such as the emergence of REITs, enactment of RERA and GST that ushered transparency into the segment.
The COVID-19 caught the global economy off the guard during 2020. After a few months of lull, a spate of government initiatives such as the extension of the Emergency Credit Line Guarantee Scheme (ECLGS), SEBI’s amendment to REITs provided the necessary impetus to the sector in 2020. According to a JLL report, India’s office market witnessed an increase in net absorption by 52% to 8.27 million sq ft in Q4 2020 (Oct-Nov-Dec), as compared to Q3 2020. The Budget that prioritizes growth over fiscal considerations is the need of the hour to sustain this momentum.
It is noteworthy that real estate is the second largest employer in India after agriculture and forms the bedrock for economic development. The sector has been demanding industry status for a long, but this remains unfulfilled until now. Recognizing real estate as an industry would enable easy access to credit lines from financial institutions. It will not only boost the liquidity but also attract institutional investors into the sector.
Infrastructure and manufacturing form the foundation for commercial real estate development. It leads to a plethora of benefits such as employment generation, skill upgradation, and residential development that has a cascading effect on the local economy. Noida is an example in this case wherein the state government has proposed major interventions such as Jewar Airport, Toy Park, Logistics Park, Film City, among others, that will ensure a socio-economic transformation of the region. An emphasis on key infrastructural projects and their speedy completion will invariably give a fillip to the office and retail spaces besides generating employment for teeming millions. Simultaneously, rationalization in the GST structure, along with the provision of input credit and reduction in stamp duties and registration charges, will boost sentiment and streamline the sector.
Amid the improving ease of doing business, several global firms are contemplating relocating to India. Built-to-suit commercial spaces provide a plug-and-play infrastructure to cater to multinationals’ requirements and script India’s growth story. Much will, however, hinge on the extent to which we can leverage this opportunity by strengthening the ‘pull’ mechanism. Amid the focus on Aatmanirbhar Bharat, the preference for indigenous content in the government contracts is a welcome step if we were to nurture the dream of Self-Reliant India. Simultaneously, it is imperative to improve economies of scale that warrant scaling up capacities and upgrading infrastructure, along with fostering a cutting-edge research ecosystem. Hence, an impetus to manufacturing through establishing dedicated clusters, export zones, and tax incentives in the Union Budget is the need of the hour.
The delay in the delivery of projects has been a potent hurdle for real estate. This factor leads to cost-overrun besides causing a lot of inconvenience to consumers. Administrative delays compound the problem, leading to additional costs for the developer and increasing the frustration of buyers. The institution of a single-window clearance mechanism in real estate will significantly enhance the ease of doing business and provide an impetus to entrepreneurship in the segment.
The COVID-19 pandemic has hastened the pace of digitization with a considerable impact on real estate. Encouraging innovation by proptech startups and MSMEs through tax concessions and extension of credit will catalyze their growth. Furthermore, the digitization of the land transactions and approval processes will ensure more transparency and accountability.
The Union Budget 2021 has the potential to lay down a roadmap for sustained real estate growth for this decade. A futuristic budget reflecting a pragmatic vision to give thrust to innovation and collaboration by developers will be a shot in the arm for real estate, leading to the turnaround of the Indian economy.
(By Ravi Singh, Head Communication, Viridian Group)