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Union Budget 2023-24: What’s in store for the real estate sector?

Union Budget 2023-24: What’s in store for the real estate sector?

by Manju Yagnik, Vice-Chairperson Nahar Group, Sr. VP Naredco, Maharashtra

Our Finance Minister, Nirmala Sitharaman has delivered a stellar Union Budget which showcases the strong vision of the Modi Government. The real estate sector, which has gone through volatile times in the past 2 years, had pinned its hopes on the first budget of the Amrit Kaal to stabilize the industry and create a strong platform that would chart the next phase of growth. However, contrary to the expectations, there were no direct measures or incentives announced in the budget which could benefit the sector going ahead. Having said that, this was a growth-oriented budget with a long-term view of social and infrastructure development which would create multiple opportunities for India’s real estate sector to grow at a consistent level.

Here are some pros and cons of the Union Budget, from a real estate perspective:

Focus on development of infrastructure
Firstly, the announcement on increasing the capital expenditure on infrastructure investment by 33 percent or INR 10 lac crores, would prove to be a game changer for the real estate sector. This would not only help boost the economy at large but would also create better connectivity across cities, thereby giving a much needed boost for the commercial, residential and retail real estate across tier 2 & 3 towns. The government is also looking at creating 50 new airports, aerodromes and helipads across the country. This would enable our country to create new realty hotspots and emerging micro markets which would lead to a real estate development boost in the surrounding localities and strengthen property rates. The multiplier effect of these measures will create new realty hotspots that will benefit homebuyers and early settlers with lucrative rentals and returns. As a result, homebuyers with an intent to invest in real estate will look for options beyond the prime regions. This demand in turn will be the driver of growth for the real estate sector

Focus on PMAY
The government is putting some extra focus on the Prdhan Mantri Awas Yojna (PMAY) and has proposed to increase the allocation by 66% to Rs 79,000 crores in the Union Budget 2023-24. Pradhan Mantri Awas Yojana – Urban (PMAY-U) was extended on August 17, 2022 up to December 2024 with all the verticals, except Credit Link Subsidy (CLSS). CLSS for EWS and LIG were till March 31, 2022. This is great news for the affordable housing market as Eligible homeowners can expect interest subvention relief on their properties

Incentivisation of Municipal bonds
An initiative that will directly benefit end-users is the incentivisation of municipal bonds to boost civic facilities. This will not only encourage the Municipal bodies to act swiftly on public concerns and improvise their creditworthiness but it will also benefit the homebuyers with improvised civic facilities and boost the overall credibility of the city, thus creating more demand for housing.

Ease of doing business
The Union Budget 2023 has made announcements on ease of doing business and has reduced the number of compliances that companies need to run establishments. This is bound to boost business and encourage more entrepreneurs to set up new businesses benefiting the co-working sector. The extension of tax holiday for start-ups by one year is a welcome measure as more start-ups would be motivated to scale up their business and enhance investment. The significant push to infrastructure will boost the commercial real estate sector and in-turn aid in faster establishment of coworking spaces in tier 2 cities. While these measures are welcome as they may create a positive ambience, the budget did not have any specific measures for the co-working sector to enable its higher growth trajectory – be it lower TDS, special tax incentive, boost to start ups, etc, to enable us to provide the real estate solutions at economical rates and help in better flow of working capital. As companies increasingly incorporate hybrid work models within their operational strategies, demand for services offered by co-working firms will continue to surge. We believe that hybrid working will become even more mainstream as we go ahead. This will push the flex-spaces sector to elevate their services further to offer more new-age office spaces. Going forward, we hope that the government looks at addressing regulatory concerns and encourages more co-working firms to open up through a series of both financial and non-financial incentives and ensure faster economic growth.

Many crucial suggestions provided by developers in the last month have gone missing, which has displeased the builder community. For example, the real estate sector was anticipating infrastructure status, which has not occurred. The minister also ignored a long-standing demand for a single-window clearance mechanism. Overall, this budget was focussed on improving the infrastructure ecosystem of India which would go a long way in benefitting the real estate industry in the long run. The announcements made in the union budget 2023-24 have strengthened the dominance of the real estate sector as an investment class. We will witness the true potential of growth coming to life in the years to come.


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