Budget to Boost The Real Estate in 2022

22 Feb 2022 , 02:55 PM

Budget is definitely the most awaited event that articulates the intentions of the government. In the long term, it provides the roadmap for development and over the short term it defines the levies, taxes and exemptions; which shape the bottom line of every business across the country. In India,real estate is the second highest employment generator, next only to agriculture and is expected to contribute over 13% of the GDP by 2025. Given the size and contribution of the sector, it is natural that budget specifically addressed this important sector.

Grappling with the issues, due to Covid, the industry was looking forward to some relief measures from the government. The major demands included raising interest exemption limit on home loan from 2 to 5 lakhs; review in limit of affordable housing to 60 lakhs, also redefining affordable housing of inclusive of cost of construction and cost of land, as per the cities and extension of loan moratorium period for business.  Though the budget did not accord all the populist demands, it was able to provide direct and indirect stimulus to all key real estate asset classes — residential, commercialand warehousing.

To stimulate growth in short to medium timeframe, the budget has announced an allocation of 48,000 crores to the affordable housing with an ambitious target of building over 8 million homes, it has granted infra status to data centers and has shown an increased focus towards the hospitality sector, these initiatives were well received. In the long term, the budget accorded a key push accorded to GatiShakti framework with an allocation of Rs 20,000 crore. This will encourage integrated logistics, infrastructure building and multimodal connectivity, all of which directly or indirectly benefit the real estate business.  In addition, the focus on development of multimodal logistic parks and cargo terminals is a great initiative to the ware housing sector. The creation of these new business hubs will lead to development of new residential and commercial projects along with the added benefit of attracting investments from India and abroad. The announcement of a new act to overhaul and replace the existing SEZ Act along with the allocation of 7,300 Crore for urban rejuvenation under AMRUT Scheme is likely to further assist in the development of commercial real estate by encouraging institutional capital flow.

By granting infrastructure status to Data Centers, the budget looks to capitalize on the government regulations for data generated in the country as well as tap the rapidly growing demand for cloud-based business operations in the country. These businesses are required to handle huge volume of data which is driving the demand for creation of data centers in the country. This is a very lucrative investment for foreign players and likely to attract huge foreign investment and thus reap rich dividends to the real estate developers. 

Another major initiative that has long term implication to the real estate industry is the proposed ‘One Nation One Registration’ which aims to facilitate land transactions and sale deed registration from anywhere in the country. This is likely to reduce the fear of investments in land and enable greater participation from investors. The mega infrastructure projects including roads and railways were expected and strongly emphasized in the budget. The next few months are likely to see many big infrastructure contracts being awarded, something which is eagerly awaited by the industry.

The initiatives in the budget will enable real estate sector to start consolidating back from the pandemic. Many populist and short-term measures have been ignored in order to prioritize a long-term growth model. The real estate Industry will indeed see a rapid growth in warehousing, construction and logistic sectors with commercial and residential sectors growing as an indirect result. The overall sentiment in the market is positive as the real estate sectors looks to bounce back to the pre covid levels.

The author of this article is ShreyAeren, Managing Director & Country Head of Berkshire Hathaway Home Services Orenda

The views and opinions expressed are not of IIFL Capital Services, indiainfoline.com