Hit hard by the rising interest rates & raw material costs as well as to maintain the growth momentum of some of its segments, the real estate sector was betting big on this year’s budget. Apart from the recurring demand for single-window clearance and industry status, developers were expecting other critical interventions and provisions like higher incentivisation of affordable housing. More tax incentives for home loan borrowers besides fiscal support and enhanced credit availability, among others, were also on their wishlist.
The Budget 2023 has kept green growth at its core, while focusing on enhancing urban infrastructure, greater penetration of technology, and inclusive development. From a real estate perspective, however, the budget did not provide any direct incentives or measures.
“The new measures announced in the Union Budget 2023-24 may certainly help unleash Indian economy’s potential. However, from a real estate point of view, there were no major direct announcements that could be seen as immediate booster shots,” said Anuj Puri, Chairman, ANAROCK Group.
On the positive side, the announcements on the infrastructure spends (especially on urban development), logistics growth, housing expenditure will go a long in supporting growth in the real estate sector across years. The measures to enhance the ease of doing business, particularly, will infuse further confidence among investors – both foreign and domestic, according to Colliers and CREDAI-MCHI.
A steep rise in the Capex to 3.3% of GDP continues to be the guiding force of the budget, providing a strong impetus to infrastructure and allied industries. “While the real estate sector expected more from the budget, there are reasons to believe it will gain from derived benefits. The direct mention was to enhance allocation to the PM Awas Yojana. Incentivisation of the new tax regime and change in tax rate slabs were the other highlights of the budget, especially for the salaried class. However, not extending the benefits to the old regime could lead to some concerns,” stated a research report by Savills India.
The outlay of PMAY scheme has been increased by 66% to Rs 79,000 crore in the Union Budget 2023-24 compared to the previous budget 22-23. The increase in funding showcases the government’s commitment on increasing affordable housing stock in the country and achieve its goal of providing housing to more people. As of January 2023, more than 1.2 crore houses have been sanctioned under the scheme in urban areas.
Commenting on the budget proposals, Amit Goyal, CEO, India Sotheby’s International Realty, said, “The Union Budget has laid out a long-term path of growth and capital investment and that is extremely positive for the Indian economy. The increased allocation to housing projects under PM Awas Yojana by 66% to Rs 79,000 crore will certainly help the affordable housing segment. Rationalization of tax slabs and enhancement of tax rebate is going to benefit the middle class which will boost domestic consumption and should aid in keeping demand for homes strong.”
However, the proposed cap on deduction from capital gains on investment in residential houses under sections 54 and 54F to Rs 10 crore can be a big deterrent for the housing industry. “We sincerely appeal to the government to reconsider this limit,” added Goyal.
Ramesh Nair, CEO, India and Market Development, Asia, Colliers, said, “For the real estate sector, the government has increased the allocation for Pradhan Mantri Awas Yojana by 66% to about Rs 79,000 crore. The increase in outlay will go a long way in bridging the gap between demand and stock in affordable housing. This will provide opportunities for associated stakeholders such as construction companies, contractors, etc. Further, expected changes in income tax slabs will result in higher disposable incomes, boding well for prospective homebuyers, mainly in the affordable and mid segment.”
Pradeep Aggarwal, Founder & Chairman, Signature Global (India), Ltd, said, “This year’s budget touched upon the most critical issue for the revival and growth of the affordable housing segment. PMAY’s budgetary allocation increased by 66%, which is good news for affordable housing. Also, the increased allocation will lead to more housing projects being taken up, in both rural and urban areas. The scheme will provide a much-needed boost to the housing sector and continue to assist those from the EWS and LIG sections of society in owning a home.”
Moreover, the Finance Minister announced that infrastructure and investment will be the government’s third priority, and capital expenditures will be increased by 33% to accelerate the country’s development.
“This increased spending is expected to help create more jobs, spur economic growth, and create a more prosperous nation. Also, in order to convert cities from manholes to machine holes, an urban infrastructure development fund of Rs 10000 crore will be set aside every year for urban development. This fund will help enhance India’s urban living environment besides modernising India’s cities and towns,” added Aggarwal.
Saransh Trehan, Managing Director, Trehan Group, said, “Overall, a good budget for the economy to prosper, including the real estate sector. Increasing the allocation to PMAY will help home buyers in economically weaker and affordable housing segments. Relief in the form of higher rebate and lower direct tax rate will give additional disposable income in the hands of the taxpayer, which will boost consumption. We can expect some benefit in the form of enhanced demand in the real estate sector as well.”
“The Budget covered all the important vehicles of economic growth by laying huge allocations wherever necessary, including for infrastructure, MSMEs, PMAY, airports revival to increase regional connectivity, women empowerment, etc. I believe it was a balanced allocation of resources, which was not populist as many were expecting. One of the biggest achievements was leaving money in the hands of people by announcing some tax changes in the new tax regime. It is now up to the people to utilize the extra money by investing in right places, such as real estate,” said Najeeb Kunil, CEO, PPZ.