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Union Budget 2022-23 – Focus on infrastructure to drive real estate growth

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Here’re the budget reaction from the real estate sector

Anuj Puri, Chairman – ANAROCK Group

Providing a broad-spectrum booster shot to the economy, Union Budget 2022-23 is progressive – especially with its emphasis on building the infrastructure of the country. The FM clearly emphasised the top priorities of the government – PM Gati Shakti for sustainable growth, inclusive development, productivity enhancement, and financing of investments.

Notably, the government also expanded the Capex target by 35.4% – from INR 5.54 lakh crore to INR 7.50 lakh crore – which may help boost overall spending towards economic growth. The budget also emphasises on the need for proper urban planning, provides some relief to states while keeping the fiscal deficit well under control.

In another major positive, the government’s aim to create 6 million new jobs over the next 5 years will enable growth of residential real estate across the country.

Some of the other major highlights of the Budget which will directly or indirectly impact the real estate sector are:

  • The government’s unwavering focus on infrastructure and sustainability will drive real estate growth over the next one year. For instance, the National Highway network will be expanded by 25,000 kms in 2022-23. PM Gati Shakti will encompass the seven engines for multi-modal connectivity for the states with speedier implementation of development projects through technology to facilitate faster movement of people and goods through INR 20,000 crore financed by the govt to speed up this project. Further, the 100 PM Gati Shakti Cargo terminals to be developed over next 3 years will provide much impetus to the logistics sector.
  • Allocation of INR 48,000 Cr for PMAY Urban and Rural will push forward its ‘Housing for All’ initiative. Under PMAY, the government plans for 8 Mn houses in FY’23.
  • As anticipated, the FM also tried to rejuvenate the MSMEs sector which has a multiplier impact on the growth of the overall economy. The ECLGS scheme has been extended till March 2023 for the MSMEs. Besides providing an impetus to the industrial development, this move is likely to have a rub-off effect on the real estate sector as well given that the catastrophic impact of the pandemic on this sector (MSMEs) slowed down the demand for affordable housing in 2021. We saw the home loan eligibility for many affordable housing buyers impacted by the pandemic due to loss of jobs and many MSMEs being shut down – resulting in significantly lower sales in this category.

If we consider numbers in terms of the new supply as well, back in the pre-Covid year of 2019, affordable housing share stood the highest – 40% of the total 2,36,560 units launched across the top 7 cities then. While in 2021, we saw the affordable new supply share come down to 26% for nearly the same number of units launched in the top 7 cities (approx. 2,36,700 units). Well, not to say that demand for affordable homes had diminished because it still has the maximum demand in India. It’s just that buyers went into a wait and watch mode. Affordable housing demand will gain momentum once the economic impact of the pandemic begins to subside for this target audience.

  • To facilitate digital inclusion and aid fund transfer, 100% of 1.5 lakh post offices will come under the complete banking system. This will enable smooth and transparent real estate transactions in the rural areas and also encourage loan disbursal to the semi urban population.
  • Increased focus on tier 2 and tier 3 cities for urban development. A high-level panel to be set up for urban planning.
  • Data Centres given infrastructure status will give an impetus to this segment of the real estate sector.

Naveen Mypala, Founder, Urban Living

We appreciate the Budget 2022, It has addressed crucial concerns such as the fact that Gati Shakti, which was just announced, would focus on the construction of multimodal logistic parks and cargo ports, boosting the warehousing sector. Furthermore, the expansion of transit-oriented infrastructure will result in a stronger focus on employment-based locations, which will help to stimulate residential and commercial demand in certain markets.  With a budget commitment of Rs.48 billion for the completion of 80 million houses in FY23 and the identification of 60 thousand homes as PMAY beneficiaries, housing for the poor remains a top priority. The recently planned reform of the Special Economic Zone Act with new laws may also promote investment in export-oriented parks.

Adeeb Ahamed, MD, LuLu Financial holdings

With the Indian Finance Minister, Nirmala Seetharaman, announcing a budget aimed at employment generation and inclusive growth, at a time when the Indian economy is witnessing significant recovery, several pre-budget expectations revolved on how the budget would pan out for the country’s MSME sector.

And rightly so. MSMEs, which form the backbone of the country’s growth story, have been the most affected over the last two years.

Thankfully, the sector was given due focus, with the extension of the Emergency Credit Line Guarantee Scheme (ECLGS) scheme till March 2023, set to benefit the working capital requirements of small businesses and NBFCs.

Expressing optimism about the budget announcement, Adeeb Ahamed, MD, LuLu Financial Holdings, said that the budget has done well to make financial inclusion for MSMEs a priority. “The extension of key schemes for MSMEs, as well as the thrust on process transparency, ease of doing business and flexible access to capital will help build a more resilient MSME community, thereby encouraging competitiveness and innovation,” Adeeb said.

There was also much focus this year on India’s payment ecosystem, and terming the announcement of an RBI backed digital currency as a historic and innovative move in India’s aspirations to become a digital economy, Adeeb added, “The rise of technology led innovative solutions in financial services can no longer be discounted, especially in a country like India, where the rampant growth of UPI and other systems have time and again shown the positive side of digitized solutions in making transactions seamless and efficient. The imminent launch of the Digital Rupee using blockchain technology is necessary for India to build a robust process around its vision of building a digital economy, and today’s announcement has set the tone for the country’s ambition. The Digital Rupee comes with the added benefit of helping lower transaction costs and making currency management easier for people from all sections of society.”

On the flipside, the Budget didn’t focus much on India’s travel and hospitality sector, and  Adeeb expressed hope that the government would look beyond some of the fiscal support measures made in the budget announcement and soon roll out effective strategies around further development of existing & potential travel corridors and tourism sites, to ramp up hospitality infrastructure on a world-class level and help the sector revive for the benefit of the economy.

Nandini Taneja, Vice President, Reach Pro Group

“The Union Budget demonstrates a strong commitment to urban growth via sustainable living and better governance. The establishment of a high-level committee for urban planning is a crucial move in the FY22-23 budget to define the future urban settings in terms of transportation, employment, health, education, and living. The budget is progressive, particularly in its emphasis on infrastructural development for the country. The emphasis on sustainable living with opportunities for all, including women and youth steers a positive approach for a sustainable tomorrow”

Abhishek Bansal, Executive Director, Pacific Group

“We congratulate the FM for coming up with a Budget with a focus on overall economic health; the announcement will lead to better-earning opportunities for people directly impacting the retail sector. We can see the retail and commercial segment moving to more Indian cities as infrastructure will improve after various announcements in the Budget. Though there was not much in terms of tax savings for people, overall economic growth will lead to increased income that will support retail consumption.”

Samir Modi, Managing Director, Modi Enterprises 

”It is heartening to see the strong stimulus incorporated in the Union Budget to catalyse overall digitisation of the economy along with the provision for digital currency to be rolled out by RBI. The accent on catalysing domestic manufacturing and powering the start-up ecosystem through adequate policy incentives are expected to be sure enablers to steer the Indian economy in a progressive direction. Besides, the boost to rejuvenate rural demand and restoring confidence in the real estate sector are surely a shot in the arm.  I am also delighted to see the special emphasis laid on the education space with access to international education in India through regulatory reforms and robust provisions made for skill development, which is indeed a far sighted and future ready move.”