Union Budget 2023-24: Key Takeaways for the Real Estate Industry

The Union Budget 2023-24 presented by the Finance Minister Nirmala Sitharaman has included several measures that could have a positive impact on the real estate industry.

This article will outline the main takeaways from the budget and analyze their impact on the realty developers.

Expectations and Disappointment

The real estate industry had high hopes for the budget, but several crucial suggestions provided by the developers were not included.

The infrastructure status and single window clearance mechanism, which have been long-standing demands, were ignored.

Additionally, there was no tax relief provided for the industry.

Green Infrastructure and Urban Planning

The budget highlights the importance of green infrastructure, green energy, and green homes.

The proposed Urban Infrastructure Development Fund (UIDF) will be managed by the National Housing Bank (NHB) with an allocation of Rs 10,000 crore to aid infrastructure development in Tier 2 and 3 cities.

Five centres of excellence for urban planning have been proposed to offer the sector access to trained professionals.

Economic Boosters

The budget predicts an economic growth of seven percent for the fiscal year 2023-24, with a planned capital expenditure of Rs 10 lakh crore, a YoY increase of 33 percent.

This is expected to attract more investors and improve cash liquidity in the market, thereby benefiting the real estate sector.

Emphasis on Tier 2 and Tier 3 Cities

The budget has emphasised the development and urban planning in Tier 2 and 3 cities, with a focus on sustainable and planned development.

This could provide an impetus to the housing sector.

Impact on Real Estate Developers

Despite some omissions, the budget has provided several positive measures for the real estate industry.

The emphasis on urban planning in Tier 2 and 3 cities and the proposed Urban Infrastructure Development Fund (UIDF) will aid public agencies in infrastructure development, which could provide an impetus to the housing sector.

The prediction of an economic growth of seven percent for FY 2023-24 and the planned capital expenditure of Rs 10 lakh crore could attract more investors, thereby improving cash liquidity in the market and benefiting the real estate sector.

The five centres of excellence for urban planning and the high-level committee of urban planners, economists, and institutions will offer the sector access to trained professionals and recommend policies for urban planning and governance.

AFFORDABLE HOUSING

The Union Budget 2023-24 has committed Rs 79,000 crore for PMAY houses, which is a 66 percent increase from the previous year.

This will increase the supply of low-cost homes under the Pradhan Mantri Awas Yojana and improve affordability in the real estate sector.

MUNICIPAL BONDS

The budget has also proposed property tax reforms to incentivize cities to improve their credit ratings for municipal bonds.

This will help alleviate urban infrastructure problems and improve real estate sentiment in these areas.

INFRASTRUCTURE DEVELOPMENT

The budget has announced the upgrading of 50 airports and ports and the Infrastructure Finance Secretariat will encourage private investments in various infrastructure projects such as urban development, power, roads, and railways.

This will lead to the development of more real estate in these areas and boost economic growth.

EASE OF DOING BUSINESS

The budget has included measures to simplify the process of doing business by reducing 39,000 compliances and proposing amendments to Central Acts.

This will make the governance process more friendly for businesses and increase transparency in real estate transactions.

EXPERT REACTIONS

Experts have given positive reactions to the Union Budget 2023-24 and believe that it lays greater emphasis on further development in the fields of infrastructure and real estate.

This will help generate more employment and lead to more innovation in the real estate sector.

The budget is seen as a positive roadmap for long-term growth in the real estate sector.

Budget 2023 and its Impact on Real Estate Sector

The 2023 Budget focuses on inclusive development, fostering growth and job creation while keeping the macro-economy stable yet growth-oriented.

The budget has given more money into the hands of individuals and households which would, to a large extent, ease out the increasing pressure on account of home loan EMIs and rising home prices.

Increase in allocation for PMAY:

The increase in allocation for PMAY by 66% would help continue capital flow under CLSS and other related schemes.

This move by the government is seen as promising in fulfilling its pledge towards affordable housing for everyone.

Focus on Infrastructure Development:

Addressing the need for creating sustainable cities of tomorrow through urban planning, ease of land availability and promoting TOD schemes is seen as key towards sustainable development.

Focus on overall infrastructure development and on Tier 2 and 3 cities is seen as key to overall economic development.

Expectations from upcoming budget:

The upcoming budget is expected to be more attractive to foreign investors as it is seen as an ultimate platform to announce further incentives to attract more foreign investments into the sector.

Expectations include reduction in tax on interest income, liberalizing foreign investment norms in real estate, ease of compliance under the Income-tax Act and reduction in withholding tax rates, among other relaxations.

Recommendations for the Government:

Capping of Rs 45 lakh applicable for an affordable house should be extended to 60 lakhs to expand the benefits of affordable housing schemes to more home buyers.

Reduce the cost of land, development premiums and tax, sops including lower interest rate to incentivize developers to build budget homes.

Allocate more funds for PMAY to achieve the target of ‘Housing for All’.

Address the demand for industry status for the sector and single window clearance for projects.

Introduce incentives to propel the growth of the sector such as introducing tax breaks which will increase public spending, less transaction cost, etc.

Summary of the key takeaways and impact of the Union Budget 2023-24 on the real estate industry

The Union Budget 2023-24 has presented several measures that could impact the real estate industry positively.

The focus on urban planning in Tier 2 and 3 cities, the proposed Urban Infrastructure Development Fund, the prediction of 7% economic growth for the fiscal year 2023-24 and the planned capital expenditure of Rs 10 lakh crore could attract more investors and improve cash liquidity in the market.

The allocation of Rs 79,000 crore for PMAY houses will improve affordability in the real estate sector.

The property tax reforms, upgrading of 50 airports and ports, simplification of the process of doing business, and expert reactions to the budget are all positive factors for the real estate sector.

The budget’s focus on infrastructure development, PMAY allocation, and foreign investment incentives are expected to create jobs and encourage innovation in the real estate sector.

The government has been recommended to extend the cap for an affordable house to Rs 60 lakhs, reduce the cost of land, development premiums, and tax, and allocate more funds for affordable housing.