The Union Budget 2023-24 has by and large ignored the long standing and some immediate concerns (even needs than wants) of the Indian real estate sector. The Finance Minister has not only ignored the supply side of the business, but also didn’t bother to address the demand side, that is the home buyers. Ironically, the leading voices of the sector are still happy with some of the intangible gains even though tangible benefits are non-existent.
Immediately after the Union Budget 2023-24 was tabled in the Parliament the real estate stakeholders got into a huddle to call it growth-driven and progressive budget. This is not the first time that the Union Budget has been hailed by the built environment of the real estate business in India despite of unmet expectations. As a matter of fact, every year they come out with a list of demands only to be disappointed and left with no choice but to look for some of the silver linings post the Union Budget.
Let’s see what all were the expectations of the real estate sector before the budget. Some of the demands were:
Reduction of GST for under construction properties to 1% for all categories
Reduction of GST on raw materials
Reduction in minimum size of REITs to INR 50 crore
Reduction in LTCG tax to 5%
Reduction in CAT I special situations funds requirements to INR 5 crore for sponsor capital and proportionate reduction in fund corpus
A separate annual deduction of INR 1,50,000 for principal repayment
Increase limit of affordable housing to INR 1 crore
Boost rental housing in the affordable segment
Special incentives for women developers by providing central subsidies on projects with Government land
Special provisions for underwriting of municipal bonds for slum redevelopment by the Finance Ministry
Allowing Overseas Direct Investment for Indian investors and increasing LRS limit to INR 10 crore
Reduction in Stamp Duty
Industry status
Granting infrastructure status for easy access to finance
Single Window Clearance to remove approval bottlenecks
LTV should be raised to 90%
If only the wishes were horses! Have any of the above wishes of the sector been granted with the Union Budget this time round. As a matter of fact, the sector is only looking for some intangible gains yet again and carry home the point that there are some silver linings for the sector.
Let’s see what are the key takeaways for the real estate with the Union Budget 2023-24:
Steep hike of 66% in outlay for PM Awas Yojana to INR 79,000 crore
Deduction from capital gains on investment in residential house under sections 54 and 54F to INR 10 crore
Credit Guarantee Scheme to enable collateral-free guarantee credit of INR 2 lakh crore
Increased capital outlay to INR 10 lakh crore; 33% of the GDP
50 more airports to fuel housing demand in Tier II and III cities
Dedicated investment of INR 10,000 crore through urban infra development to fuel commercial real estate & housing
Boosting start-ups to fuel demand for more commercial spaces
Why are the industry stakeholders in a déjà vu then?
Ramesh Nair, CEO, India & MD, Market Development, Asia at Colliers believes the Union Budget 2023-24 makes a commitment towards green growth, while focusing on augmentation and enhancing urban infrastructure, technology, and inclusive development. At the same time, the budget throws open the doors for increased consumption and capital investment, to drive growth. The capital outlay for infrastructure at INR10 lakh crore, or 3.3% of GDP is significant as it can lead to multiplier effect across sectors and set a strong footing for a resilient growth.
“Dedicated investment of INR 10,000 crore through the urban infra development fund will result in creation of quality of urban infrastructure thereby improving quality of life. This will also translate into higher demand for housing and commercial real estate. For the real estate sector, the government has increased the allocation for Pradhan Mantri Awas Yojana by 66% to about INR 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,” says Nair.
There are very few industry stakeholders who admit on record that the glass has been more than half empty for the sector. Sachin Bhandari, Executive Director & CEO, VTP Realty categorically says that the budget this year is as expected, on the lines of pleasing the general population through various incentives in the run up to 2024 General Elections. Specific to the real estate industry in India, the HNI customers will have more money in hand because of this budget. The budget is effectively reducing their tax outflow from 43% to 39% ensuring a net savings of 4% for the HNIs. As an example, if an HNI is having an annual income of INR 5 crore, his or her net savings due to this change will be approximately INR 15 lakh rupees per annum. This 15 lakhs saved will give that person an additional INR 1.5 crore of home loan eligibility thereby allowing that customer to buy a more costlier home.
“Increase in infrastructure investments has gone up by 33% to INR 10,000 crores. This will create huge employment across all levels, especially in the labour class. Therefore, money circulation in the economy is expected to increase drastically. This will lead to increased spending in the consumer segments, from FMCG, to real estate to consumer retail. Lastly and most importantly, the real estate sector is completely ignored in the entire budget speech. Real estate sector is the second largest contributor to the GDP of our country, it is also the second largest employer in the country. It has a phenomenal cascading effect on multiple allied industries. In spite of all that, there is not a single initiative to incentivize the real estate sector and that is disappointing for the whole sector,” says Bhandari.
The overt optimistic overtones apart, privately the real estate players agree that the Finance Minister has yet again ignored the sector in her budget allocation. A section of the developers blame no one but their own community for creating a misplaced optimism that all is well with the sector. They question why would the Finance Minister address the pain point of the business when the leading voices (and leading listed companies) give an air of boom time. The large universe of the developers with no voice are hence left to sulk budget after the budget.
Ravi Sinha
#RaviTrack2Medi
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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