The Indian housing sector did very well in 2022. Recent reports by real estate consultants like Anarock confirm that residential property sales during the year not only increased by over 50% over 2021 but also reached a new all-time peak. But this does not mean that everything is smooth sailing for the Indian housing sector as it looks at 2023 and beyond.
The economic disruptions directly and indirectly caused by the Russia-Ukraine war and Covid-19 before that have had ripple effects on India, as well. Monetary policy tightening in the US as well as in India have made home loans costlier, supply chains have suffered, and the cost of construction raw materials has gone through the roof, resulting in housing price increases.
Also, the boom that the housing sector enjoyed in 2022 mainly benefited housing in the upper budget categories, purchased by people with good financial stability. Affordable housing had a really tough year in 2022, with demand for such homes falling and developers concentrating more on projects featuring bigger apartments.
Union Budget 2023 presents an opportunity for the government to address various issues faced by the Indian housing sector in 2023 and beyond. Here are some of the key areas where the housing sector could benefit from the budget:
- More support for affordable housing: Affordable housing has been a major focus of the government in recent years, and this segment depends on various incentives and policy provisions for its growth. The budget could increase the allocation for the Pradhan Mantri Awas Yojana (PMAY), a government scheme that aims to provide affordable housing to the urban and rural poor, and also increase tax incentives for developers who build affordable housing projects.
- Infrastructure development: Improved infrastructure is essential for the growth of the housing sector, as it makes it easier for people to access housing and for developers to build new projects. The budget can - and undoubtedly will - allocate more funds for the development of infrastructure that will help the housing sector, such as roads, public transportation, and utilities.
- Land acquisition: One of the major challenges facing the housing sector is the difficulty of acquiring land for development. The budget could take steps to streamline the land acquisition process, such as by simplifying the procedures for obtaining land titles. Providing financial assistance to affordable housing developers for land acquisition would also be a step in the right direction.
- Credit availability: Easy access to credit is crucial for the housing sector, as it allows developers to finance their projects and enables individuals to purchase homes. The budget could take steps to improve credit availability, such as by expanding the reach of housing finance companies or by providing tax incentives for banks that lend to the housing sector.
- Regulation and policies: The housing sector is also impacted by various regulations and policies, and the budget could take steps to streamline these and make them more conducive to the growth of the sector. This could include measures such as simplifying building codes, reducing red tape, and improving the ease of doing business in the sector.
- Rental housing: The rental housing market in India is still relatively underdeveloped, and the budget could take steps to encourage the growth of this sector. This could include measures such as providing tax incentives for developers who build rental housing projects.
Overall, the Indian housing sector has a number of needs that could be addressed in the Union Budget for 2023. By doing so, the government can help to boost the development of the sector, increase access to housing for a wider range of people, and support the overall growth of the economy.
by Anil Pharande, Chairman - Pharande Spaces & President - CREDAI Pune-Metro