Budget 2022 : From the percpective realty player and homebuyers

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By JatinSuratwwala Managing Director and Chairman of Suratwwala Business Group Ltd

The Union Budget of 2022-2023 has come about during a pandemic the likes of which was last seen about a century back. In the meanwhile, humanity “progressed” by apparently making things that would make life better though it’s outcome at best can be called mixed. Cut to the present, the pandemic has ravaged industries including those related, directly or otherwise to real-estate and housing. Everything from the steel and cement industry to specialized equipment and brokerages have been affected.In some cases the effect has been bad – to the extent of a closure.

In the backdrop of such a state, it was expected that the budget would come up with measures to crank up the demand for realty with sops and incentives. With the pandemic being exceptionally harsh on the middle class which with its upward mobility was expected to take the country to higher grounds, it was expected that sops would be directed towards their welfare. Theirs’ is a precarious situation given that they miss out on most hand-outs, don’t have great inheritances and are most likely to slog hard for a better tomorrow.

In particular, expectations across the spectrum from the budget 2022-2023 ran on the following lines:

– Homebuyers. They expected to get more tax cuts and sops (rate cuts, higher standard deductions, more reliefs under individual heads and the likes) and higher relief on home loan rates besides some reliefs on the purchase of a second home. In the tax sops, the specific areas were standard deduction that was expected to increase cash available to buyers and relief on long-term capital gains besides minimum tax rebate of Rs 5 lakh as against the current limit of Rs 2 lakh.

– Developers. This group had expectations of an arrangement for soft loans to both complete projects besides starting new ones. Theirs being a large capital outflow business, the slightest slack in demand means their taps runs dry pretty fast. With the pandemic putting a complete stop on new buys (itself related to an overall industrial slowdown of epic proportions), realtors and builders find themselves short on cash to complete projects or initiate newer ones. They were expecting sops in the form of soft loans to tide over the crises. It didn’t come about in any material form. The other expectation was of relief on GST (a single slab, relaxation in under-construction realty, and reduction in taxes on key raw materials). The latter in no small measure would bring down prices and make new realty affordable to a larger section of buyers.

– Providers of raw materials. Steel, cement, construction equipment as industries completely depends upon demand for realty, homes, commercial real-estate, factories and the likes. Higher the demand for realty, more do these industries flourish. Per-se not directly related to the budget, any increase in off-take of steel and cement is bound to get the industry cranking up for good times. Issues including GST rates, soft loans and the likes only make things sweeter for the industry by pushing up margins. That said, what really get the industry going is higher demand for homes, offices, factories and the likes.

The highlights of the budget 2022-2023 vis-à-vis the building, construction and realty industry ran in particular on the following lines:

  • Affordable housing: It saw a proposal to allocateRs 48,000 crore for the completion of construction of 80 lakh houses in the category
  • Infrastructure, in particular roads: The budget clearly stated the need for a master-plan for expressways that would be implemented in the interim year. Add to this, plans to build an additional 25000 kms of highway during the budgetary year 2022-2023
  • World-class rail infrastructure with 100 Gatishakti cargo terminals in 3 years
  • Planned urban development: Reviving urban planning and housing with better infrastructure + identification and recording of land-parcels in urban centres with better documentation procedures + 1 nation 1 registration for land reforms

All this in the present scenario leads to the following conclusions:

  • Housing benefits for a certain category! With the government itself allocating a sizable chunk for affordable housing, this category which is mostly the urban and rural poor could see their dreams materialize. The same can’t be said for the other sectors where there’s no allocation or tax benefits or other sops
  • Builders! They too get no direct benefit. That said, a perceived GDP growth of 9.2% (as per RBI) in fin year 2022-2023 could bring money into people’s hands with overall buying sentiments buoying later in the year.
  • Infrastructure projects! Infra has got a major push in the budget, be it for roads, rail or logistics infrastructure. This could have multiple benefits including increasing employment, and bigger markets for steel and cement. In the later years, these developments could be the reason for higher growth, both domestically and for exports leading to a positive addition to GDP.
  • Steel and cement industry! Continuing from the above, this budget could give the right shot in the arm to the steel and cement industries which have seen low offtakes due to the lockdown and related slowdown. This industry could then contribute to employment and sustaining GDP growth later in the year.

In sum, the budget shall have a mixed outcome.

Corporate Comm India (CCI Newswire)