How The Budget 23-24 Will Affect The Real Estate Industry

February 12, 2023 | mins read

Nirmala Sitharaman delivered the fifth Union Budget, which focused on the growth and progress of the country. The budget was based on the Amrit Kaal plan, a 25-year period leading up to India’s 100th year of Independence, announced last year. Although there were several significant measures announced that will impact the real estate sector directly, let’s examine the primary highlights of Budget 2023 and analyze how they will affect real estate developers.

Budget 2023 highlighted the importance of green infrastructure, green energy, and green homes. The Finance Minister presented a well-balanced budget, although it was disappointing from the perspective of the real estate industry. Last year, the Minister announced the SEZ Amendment Act to enable domestic companies to operate in IT SEZ, but it was missing this year.

The industry was surprised by the capital gains set off on residential home investments under Section 54, which is now capped at Rs 10 crores to eliminate the speculative nature of the asset class for HNI/UHNI individuals. The real estate sector had hoped to encourage investors to view it as an asset class. However, the increased allocation to the Pradhan Mantri Awas Yojana has addressed more than 55% of the estimated funding gap for projects under the scheme.

While there have been reductions in certain aspects, measures such as urban and affordable housing have been seen to be beneficial. Below are a few measures that are expected to improve the situation of realty developers who were severely impacted due to the pandemic.

  • Urban Planning:
  • The Finance Minister emphasized the importance of development and urban planning in Tier 2 and 3 cities in this year’s budget, which could give a boost to the housing sector. The proposed Urban Infrastructure Development Fund (UIDF) will be overseen by the National Housing Bank (NHB), and it will assist public agencies in developing infrastructure in these cities. The government has allocated Rs 10,000 crore to this fund.

    Furthermore, the government has proposed setting up five centres of excellence for urban planning, which will provide the sector with a means to employ trained professionals. A high-level committee of urban planners, economists, and institutions will be established to recommend urban planning policies, implementation plans, capacity building, and governance.

  • Affordable Housing:
  • The Union Budget 2023-24 has pledged a sum of Rs 79,000 crore for the construction of houses under the Pradhan Mantri Awas Yojana (PMAY), which is a 66 per cent increase from last year’s allocation. This funding will aid in expanding the availability of affordable housing options.

  • Ease of Conducting Business:
  • Last year’s Union Budget proposed a Unique Land Parcel Identification Number for digital land records management to increase transparency in real estate transactions. Additionally, efforts are underway to translate land records from regional languages. The ‘anywhere registration’ of deeds and documents under the ‘One Nation One-Registration Software’ has the potential to revolutionize the real estate sector in India.

  • Infrastructure Growth:
  • The Union Budget 2023 is set to provide a substantial impetus to the infrastructure sector, which is expected to facilitate the recovery and growth of the economy. The government’s emphasis on green capital expenditure is anticipated to cater to the energy requirements of the industry. All in all, this budget is a forward-looking strategy for achieving long-term progress.

  • Municipal Bonds:
  • During the budget presentation, the Finance Minister mentioned property tax reforms aimed at incentivising cities to enhance their credit ratings for municipal bonds. These bonds can assist in tackling urban infrastructure issues and boost the real estate sentiment in these regions.

  • Planned Capex:
  • The Finance Minister has predicted a seven per cent economic growth for FY 2023-24. The planned capital expenditure of Rs 10 lakh crore, which is a YoY increase of 33 per cent, is expected to promote more development across the country, consequently attracting more investors. This could help improve cash liquidity in the market and ultimately benefit the real estate sector.

    The Union Budget presented by our Finance Minister, Nirmala Sitharaman, has been widely appreciated for showcasing the Government’s strong vision. The real estate industry is likely to welcome the announcement of multiple personal income tax slabs. The increase in the tax rebate limit and the reduction in tax rates across all slabs are expected to enhance market liquidity. This could potentially allow individuals to have more disposable income to save and invest in real estate, thus improving the growth prospects of the sector.

    Goyal & Co. | Hariyana Group is keen on growing in the industry with the given regulations of the budget. Its vision is to serve a fine experience to its customers and define the skyline of Bangalore.