This has been a historic budget wherein for the first time, the rail budget was merged with the General Union Budget and advanced to the first day of February. Post demonetization, the expectation was to have a considerably encouraging budget.
By Divya Seth
This has been a historic budget wherein for the first time, the rail budget was merged with the General Union Budget and advanced to the first day of February. Post demonetization, the expectation was to have a considerably encouraging budget. Though devoid of any big bang announcements, this year’s budget was positive, progressive and focused towards the ultimate outlook of the current government to streamline the basic necessities, i.e. “housing for all”, “infrastructure” and “job creation”; thus ensuring a firm path of sustained growth.
The much-awaited decision of bringing affordable housing under the infrastructure bracket is poised to give a huge impetus to the sector. The affordable housing segment is where the actual housing shortage is. Owing to the low margins in this sector, a number of developers who had not given a thought to this sector may now evaluate entering this segment, which would aid growth in the segment where there is considerable demand. The recognition of affordable housing to be at par with infrastructure would open gates to cheaper domestic and international finance.
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From an infrastructure development perspective, the focus is evident from the steps being taken in that direction and the allocation of funds would ensure that these objectives are met. Initiatives towards investments in infrastructure, including roads, highways and airports are all also going to create more jobs in the sector. The tax bonanza for small firms, allocation of funds towards MGNREGA are all aimed towards enhancing job creation.
The entire focus of the budget is in line with the government outlook of increasing affordability. At the same time, focused steps have been taken to bring the informal economy into the mainstream by banning cash transactions over 3 lakh and introducing steps to promote a digital economy to ensure speed and transparency in the system and powering growth. This push towards digitalization would help improve liquidity within banks and further spur low cost deposits thus reducing the cost of funds. This would eventually impact the demand supply in the market, making it more balanced. Efforts towards weeding out black money, corruption and ensuring good governance are driven by the efforts to regulate political funding. The home buyers confidence in the real estate industry is likely to increase if the RERA is also implemented at the earliest.
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Though the budget has provided the necessary impetus towards ensuring sustained growth, it has not really provided any immediate benefits to the middle and upper middle class consumer to kick start private investment.
Overall, the budget has lived up to the expectations of the industry and has reiterated the vision of the prime minister towards ensuring affordability of real estate for the masses and at the same time ensuring that it remains an attractive asset class for investment for both domestic as well as international players.
(The author is Associate Director, Valuation & Advisory, Colliers International India)