The Union Budget 2023 was recently announced in India, and it has elicited mixed reactions from the Real Estate industry. The Indian Real Estate sector was eagerly waiting for the budget, as there was hope for a slew of policy changes and regulatory boosts. However, there was no major announcement in this regard, which has left the industry a little disappointed. But the silver lining is the government's emphasis on urban development and infrastructure growth, which is evident from the increased capital investments.
Some major announcements in budget 2023
The Union Budget 2023 has brought positive news for the housing sector, as the allocation for Pradhan Mantri Awaas Yojana has been increased to 79,000 crore for the next fiscal year. This is expected to contribute to the development of low-income and affordable housing throughout the country.
Finance Minister Nirmala Sitharama announced that changes would be made to the calculation of capital gains in cases of joint property development, with money paid by cheque or other forms of payment considered as consideration. Cities will be encouraged to improve their credit worthiness for municipal bonds through implementing property tax governance reforms and ring-fencing user charges on urban infrastructure.
A new Urban Infrastructure Development Fund (UIDF) will also be established through priority sector lending shortfall, managed by the National Housing Bank. The fund will be used by public agencies for urban infrastructure development in Tier 2 and Tier 3 cities and states are encouraged to leverage resources from existing schemes and the 15th Finance Commission's grants. An estimated 10,000 crore will be made available each year for this purpose.
The newly established Infrastructure Finance Secretariat will help all stakeholders in obtaining private investment for infrastructure projects, including railways, roads, urban infrastructure and power, which are heavily dependent on public resources. States and cities will also be motivated to undertake urban planning reforms to transform cities into sustainable, efficient, and inclusive places.
Exemptions will be provided for any income earned by bodies or authorities established for the purpose of housing, urban planning, development, or regulation, regardless of whether they carry out commercial activities. This is in line with the government's goal to make housing and urban development accessible and affordable for all.
Industry player’s opinions on the budget 2023-
The overall Capex for the fiscal year has been increased to INR 10 lakh Crores, which is close to 3.3% of the total GDP. This will provide a massive boost to physical infrastructures such as highways, roadways, railway corridors, urban corridors, industrial clusters, and aviation.
This, in turn, will have a ripple effect on the economy, job creation, expansion of the entrepreneurial ecosystem, and a general surge in income levels. The positive impacts of this shift will not be restricted to the housing sector, but it will also extend to commercial, warehouse, retail, and other categories of the Indian Real Estate industry.
The government has also increased the allocation for the Pradhan Mantri Awas Yojna, which is a commendable step. This budget session is a continuation of the government's commitment towards infrastructure growth, spurred urbanization, and affordable housing projects.
The allocation of INR 10,000 Crore in infrastructure funds that will be managed by the National Housing Board (NHB) will benefit the Real Estate industry and set the tone for increased growth and demand.
Gurmit Singh Arora, National President of the Indian Plumbing Association, noted that the government's commitment to top-class urban and rural infrastructure development in the form of higher capital investments and dedicated urban infrastructure funds also entails benefits for the Indian plumbing and related industries.
The total capital expenditure will be INR 13.7 lakh Crores, forming 4.5% of the overall GDP, which will lead to increased investment in roadways, construction, water supplies, urban growth, logistics, and more. This, in turn, will drive demand for plumbing, pipelines, fittings, and related products.
Nakul Mathur, MD of Avanta India, also highlighted the government's commitment to infrastructure development, urban growth, and the housing for all program. The effective capital expenditure will be INR 13.7 lakh Crores, forming 4.5% of the GDP, and the outlay for PM Awas Yojna has been increased by 66% to INR 79,000 Crores.
The emphasis on infrastructure development in the form of roadways, power, healthcare, railway corridors, water supplies, affordable housing programs, and more will drive economic growth and push demand for housing, urban communities, construction activities, office spaces, and more.
Siddharth Maurya, a Resource Specialist in Real Estate and Fund Management, mentioned that the union budget did not announce any Real Estate-specific policy, which was a little disappointing for the industry players.
However, the industry welcomed the government's continued support for infrastructure growth, and the allocation of INR 10,000 Crore for infrastructure funds that will offer an institutional framework for development in Tier 2 and 3 cities. The capital expenditure has been increased to INR 10 lakh Crores, which will link infrastructure growth, economic prosperity, and Real Estate demand.
The outlay for PM Awas Yojna has been increased by 66% to INR 79,000 Crores, which is another positive announcement.
The Union Budget 2023 has been met with positive reactions from the housing sector. Saurabh Garg, Co-Founder and Chief Business Officer of No Broker, expressed hope that the budget will provide a boost to the development of low-income and affordable housing across India. This is due to the significant increase in allocation to Pradhan Mantri Awaas Yojana, which has been set at ₹79,000 crore for the next fiscal year.
However, Mr. Garg also noted that some changes in the budget aim to better target tax concessions and exemptions. For instance, the Finance Minister has proposed limiting the deduction from capital gains on residential property investment under sections 54 and 54F to 10 crores. This is a departure from the previous approach, where there was no limit on this benefit. High Net Worth Individuals (HNIs) would often use this option to reduce their Capital Gains tax liability, but the proposed changes would substantially limit this benefit for HNIs.
On a positive note, Mr. Garg mentioned that the increase in the tax rebate limit to ₹7 lakh and the reduction in the tax structure across all slabs would definitely help inject more liquidity into the market. Individuals would now have more disposable income to save and invest in homes, which would further drive the growth prospects of the housing sector. This is a welcome development, and it is hoped that these measures will lead to an increase in investment in the housing sector, which will in turn boost the overall economy.
Overall, the Union Budget 2023 appears to be well-received by the housing sector, and it is hoped that these measures will lead to positive developments for the sector in the near future.
