In the opening sections of her speech presenting the much-awaited Union Budget 2021-22, Nirmala Sitharaman outlined six pillars of proposals to strengthen the vision of Atmanirbharta. These include health and wellbeing, capital and infrastructure, inclusive development, reinvigorating human capital, innovation and R&D and minimum government and maximum governance.
As expected, healthcare got the highest priority in resource allocation and policy support including Rs 64,180 Crore outlay under PM Aatmanirbhar Swastha Bharat scheme.
Now that the Budget is out, has it pleased or disappointed the real estate sector?
Well, to begin with, India’s infrastructure development received highest priority in Sitharaman’s budget. There were no significant measures announced for the real estate sector, in particular, but real estate experts feel that the boost to infrastructure would augur well for the sector in the long run.
Shot in the arm for infrastructure
Highway infrastructure proposal includes building 8,500 km of highways by March 2022.
There were major sops announced for poll-bound states including West Bengal, Tamil Nadu, Kerala and Assam. These include:
- 3,500 km corridor in Tamil Nadu
- 1,100 km in Kerala at an investment of Rs 65,000 Crore
- 675 km in West Bengal at a cost of Rs 95,000 Crore
- 1,300 km in Assam in the next 3 years
The government also announced the Bill to set up Development Finance Institution (DFI) providing Rs 20,000 Crore to boost infrastructure projects.
Metro rail
MetroLite and MetroNeo will be introduced in Tier II cities and peripheral areas of Tier I cities. These are low-cost Metro projects.
Central counterpart funding to:
- Kochi Metro Railway Phase-II of 11.5 km at a cost of Rs 1957.05 Crore
- Chennai Metro Railway Phase –II of 118.9 km at a cost of Rs 63,246 Crore
- Bengaluru Metro Railway Project Phase 2A and 2B of 58.19 km at a cost of Rs 14,788 Crore
- Nagpur Metro Rail Project Phase-II and Nashik Metro at a cost of Rs 5,976 Crore and Rs 2,092 Crore respectively.
“The Modi government has not lost sight of its USP of infra creation, which will help connect more areas and thus open them up for real estate development,” said Anuj Puri, Chairman, ANAROCK Property Consultants.
Reiterating the same, Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory said, “The government’s big bet on infrastructure is bound to pay off in the long-term and will also catapult desired growth for real estate and the economy.”
Boost to affordable housing
- Additional deduction of interest, up to Rs 1.5 Lakh, for a loan taken to buy an affordable house extended for loans taken till March 2022
- Tax holiday for affordable housing projects extended till March 2022
- Tax exemption allowed for notified Affordable Rental Housing Projects
Setting up of ARC & AMC
Post the pandemic, the chances of NPAs growing are significantly high. The Budget announced the setting up of ARCs to help banks to cushion the impact of the pandemic. In addition to setting up the long-awaited bad bank, the government will also infuse Rs 20,000 Crore into public sector banks as part of its recapitalisation plan.
“The NPA’s of PSU banks have seen an encouraging reduction from 8.96 to 6.8 trillion by end of Fiscal 2020. The setting up of ARC & AMC for banks troubled with bad loans and NPA’s alongside the further recapitalisation of Rs.20,000 crores will help improve the lending capacity of the banking & financial sector,” explained Kaushal.
Others announcements
Customs duty on steel reduced to 7.5% will create some space for real estate developers who may not be in a position to increase prices immediately.
“The announcement to set up seven mega textile parks with a plug-and-play facility in three years will unlock the potential of new markets for development and provide an impetus to real estate assets, including logistics and warehousing,” said Anuj.
Final thoughts
All in all, the budget was broad-based with special emphasis on building robust healthcare infrastructure, physical infrastructure and affordable housing. “It will result in job creation in the informal sector, which was severely impacted by the pandemic. Creating buoyancy in the job market will benefit the Indian economy in the long run. The focus on rural job creation will also give a boost to affordable housing, which will help increase housing demand in tier II and III cities,” concluded Anuj.
While the government has furthered its commitment to the affordable housing, many issues remain unresolved for the real estate sector.
“The government has announced various measures, which were commendable, but the real estate sector needed many more interventions on the demand side for meaningful growth. It was important to bring back the input tax credit as part of GST reforms and lower GST rates for the purchase of raw materials, which would have helped reduce the cost of construction. An important measure to boost demand in real estate would have been to introduce a GST waiver on under-construction projects too,” said Lindsay Bernard Rodrigues, Co-Founder and Director, Bennet & Bernard Group.