Budget Growth Oriented, Needed More Thrust to Real Estate to Spur Demand: NAREDCO Maharashtra

Mumbai, February 06, 2023: NAREDCO Maharashtra has called the Budget presented by the Finance Minister well balanced and growth oriented, but wished that more concrete and consistent policy measures, could have given a further fillip to the real estate industry.

NAREDCO Maharashtra organized a Knowledge Session ‘Realty of Budget 2023’ with real estate industry experts, to analyze the Budget and its impact on home buying and real estate industry. Dr Niranjan Hiranandani, Vice Chairman, NAREDCO; Adv Anil Harish, Partner, D.M. Harish & Co., Advocates; Shri Rajiv Sabharwal, MD & CEO, Tata Capital Ltd.; Shri Srini Sriniwasan, MD, Kotak Investment Advisors Ltd.; Mr. Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure Ltd. and Mr. Navin Makhija, MD, The Wadhwa Group formed the august dais along with Mr Anuj Puri, Chairman & Founder, Anarock who moderated the session.

Adv. Anil Harish, Partner, DM Harish & Co analyzed the Budget and its implications.

Mr. Sandeep Runwal, President, NAREDCO Maharashtra welcomed the budget which he said is a fine balance between sustainable growth and financial stability. He applauded the honorable Finance Minister, Smt. Nirmala Sitharaman for her hard work in meeting the aspirations of the people through lowering income tax brackets and driving forward growth with increased infrastructure budget.

Adding further he said, “Pradhan Mantri Awaas Yojana (PMAY) is a lofty initiative by the central government, aiming to bring affordable housing for all. The staggering 66% increase in funding for the scheme to Rs 79,000 crore for the next fiscal year is expected to address more than 55% of the estimated deficit in funds for projects under the scheme, providing a huge impetus in providing housing to those in need.”

“The First Budget of Amrit Kaal, Budget 2023, struck all the right chords. Income Tax Reforms ensured more disposable income in the hands of citizens to accelerate demand-based growth. The government has also taken an honest effort to reduce taxes from all the tax slabs which is a great initiative,” added Mr. Runwal.

Dr. Niranjan Hiranandani, Vice Chairman, NAREDCO opined, “The real estate industry has a long way to go in realizing the goal of housing for all. India needs a greater push in the affordable urban and rural housing space for making housing possible to a last mile person, which requires a consistent growth impetus to the real estate sector. India needs to create a surplus of houses. Measuring the demand for housing, Dr. Hiranandani mentioned that the Budget could have given certain deductions against home buying and restructuring of home loan installments, which could have softened the burden on the home buyers.

Adding further Dr. Hiranandani said, “It is a fantastic budget overall but not much has been done for the housing sector. Home loan EMIs need to be restructured. There is a surplus of stock in clothing and other sectors, but where is the surplus in housing stock, he asked. We need to further develop the concept of rental housing that is viable. In the US, 50% of the population lives in rented houses all their lives. He goes on to add that no one will invest in rental housing as returns are not working. They will rather invest in commercial real estate.”

“The government needs to set up bodies like charitable trusts set up during British rule or chawls which provided people with inexpensive accommodation. The aim is to provide every citizen in the next 5 to 10 years with a house to live in; be it owned or rented. Over 50% of Mumbai’s population lives in the slums. This goes on to show that we have not done enough in providing better housing for our citizens. The 66% increase in the PMAY outlay to Rs. 79,000 crores are not for urban housing alone but for both urban and rural housing.”

Mr. Navin Makhija, MD, The Wadhwa Group observed that the Government wanted to take the development agenda to tier II and tier III cities and it was an opportune time to look for development opportunities in such areas. Mr. Makhija envisaged that due to stiffening of interest rates the cost of buying affordable housing had gone up.

He further went on to add, “We need to focus on affordable housing bringing in more investments into this segment. It has become slow due to increase in home loan interest rates and also input costs have gone up. On the other hand, commercial realty and IT are doing well. Prices have firmed up as well as occupancy. Huge allocations have been announced for various infra projects but we need to see if execution at the ground level is taking off. The direction is right but the pace at which projects are being completed is the big question.”

Assessing the impact of removing the Income Tax Act’s Section 54 that allowed indexation of capital gains, the experts felt that the move could impact the housing sales. Mr. Srini Srinivasan, MD, Kotak Investment Advisors Limited said, “We were expecting a more populous budget with taxes going up, but that did not happen. The cap of Rs 10 crore on the capital gains deduction will impact the luxury housing segment, mainly in Mumbai. There will be bunching of sales till 31^st March 2023. Additional tax on REITS was a dampener but overall the budget on housing was a good one.”

Mr. Rajiv Sabharwal, MD & CEO, Tata Capital Ltd., lauded the Finance Minister’s efforts to balance both the short and long-term growth measures. He maintained that though the Budget has not proposed any new proposal for the real estate industry, it has not dented the ongoing pace of growth, as the real sector had caught a good momentum due to the Government’s push for the past two years.”

He further added, “More could have been done in reducing income disparity. The income tax exemption rebate being increased from Rs. 5 lakhs to Rs. 7 lakhs will impact the housing sector positively as individuals will benefit with more money in their hands. Home buyers will invest in a project with good amenities coupled with quality construction and timely delivery. There has been no impact on the realty market due to home loan interest rate increase.  The government should find ways to control the prices so that the unit price does not go up for the home buyer.”

Agreeing that a big boost to urban infrastructure will spur investments, the experts pressed on the need to have cooling off the cost of capital in India. Mr. Anuj Puri, Chairman & Founder, Anarock while moderating the session cautioned that the foreign investors were finding the US market cheaper than India and preferring to invest there than India.   

Mr. Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure Ltd., mentioned that while the USA was becoming cheaper to the investors, they preferred staying there instead of coming here. India needed to be consistent with its policies. The government has not done anything to disrupt the cost of capital in the country, which is good and welcomed.