Union Budget 2022-23: Slew of reforms from both the demand and supply sides would have further strengthened the success of the initiative
The real estate sector has seen a healthy revival in 2021, led by the ebbing effects of COVID-19 as well as measures adopted, such as stamp duty cuts, low-interest rates, and the push for affordable homes.
Going into FY23, the real estate sector had put forth a list of recommendations from the Union Budget 2022 to sustain this momentum of growth. The Budget brings glad tidings for the sector, with a continued focus on additional allocation and expansion of the Pradhan Mantri Awas Yojana scheme.
However, a slew of reforms from both the demand and supply sides would have further strengthened the success of the initiative.
This year’s Budget sees a 35 percent increase in capital expenditure to Rs 7.5 lakh crore in 2022-23, with a major focus on revamping infrastructure investment. Additionally, there have been two key announcements in the Budget that favours the real estate segment with affordable being a prime beneficiary.
There is a greater emphasis on collaboration and streamlining of the approval process for construction to promote affordable housing for the middle-class and economically weaker sections in urban areas. With a continued focus on ‘Housing for All’, the finance minister has announced the identification of 80 lakh households for the affordable housing scheme, while also allotting Rs 48,000 crore under the Pradhan Mantri Awas Yojana scheme for FY23. This move will strengthen and expand the ambit of the policy initiative, providing housing access to a larger population.
Demand-side concessions were a miss
While we see focused efforts towards affordable living, experts from the real estate sector were anticipating additional benefits and tax sops in the budget, including an extension of additional interest deduction of Rs 1.5 lakhs, expansion of area and value covered for affordable housing in both metro and non-metro cities, among others. This could have further enhanced the purchasing power of the buyers and encouraged more loans in the segment. Moreover, from the developers’ standpoint, benefits in the form of tax holidays, government subsidies, and Public-Private Partnerships could have given further impetus to the development of this section.
Positive sentiment prevails
The real estate sector overall, including affordable housing, has been reaping the benefits of the measures and policy interventions announced in the Union Budget 2021. With additional state and central government collaboration to streamline the process, we might see larger participation in the segment in the coming year.
Affordable housing has always been one of the focus areas of the government, especially increasing affordability in rural areas. While continuing to support affordable and sustainable living, the finance minister’s announcement has given a larger push towards urban development as well. This is expected to bring about ancillary benefits in the form of enhanced infrastructure and increased connectivity—thereby increasing the housing segment’s attractiveness.
The author is COO – India Global and National Leader – Supply Chain Realignment, KPMG in India. Views are personal.)