The Budget presented by Finance Minister Nirmala Sitharaman, for FY2023-2024 was a blend of pro- growth initiatives, inclusive development, and job creation. All this while maintaining macro- economic stability and fiscal prudence. The Union Budget 2023 aims to increase consumption in the economy, subsequently driving growth in various sectors and leading to robust GDP growth of 6 - 6.8%.
India’s real estate industry, which is the second largest contributor to employment generation has shown much resilience since the pandemic, was also a key focus in the budget. On the back of rapid urbanisation and growth, the real estate market is all set to reach a market size of $1 trillion by 2030, and will contribute 13 per cent to the GDP by 2025. Let’s look at the impact of budget on the real estate industry and benefits for first time home buyer.
The Union Budget had some positive announcements for real estate industry. The biggest boost for the sector was the enhancement of allocation for PM Awaas Yojana (PMAY) by 66% to over Rs 79,000 crore. This move could catalyse growth in the affordable housing segment. Increased allocation for the segment seems comforting, given the fact that the beneficiaries in the Pradhan Mantri Awas Yojana (PMAY) scheme are largely from low-income group households in the unorganised sector. Top developers and Grade A developers like Lodha have launched affordable housing projects which while being affordable offer uncompromised living to its residents with good quality construction, host of amenities and services.
Launched in 2015, Pradhan Mantri Awas Yojana (PMAY) is a flagship mission of the government to provide housing for all, especially beneficial to a first time home buyer. Last year, the finance minister had allocated Rs 48,000 crore to complete 80 lakh houses for eligible urban and rural beneficiaries. Further, the finance minister announced measures to make the new personal income tax regime more attractive for taxpayers. Under the new tax regime, there will now be effectively no income tax for individuals with an annual income of up to Rs 7 lakh from FY24. This limit was increased from Rs 5 lakh in the current fiscal.
Moreover, a change in the tax slabs under the new regime was also made for individuals with an annual income of more than Rs 7 lakh. Due to the lower tax outgo, the disposable income in the middle-class population’s hands will increase, which, in turn, will boost the purchasing power and help stimulate economic growth. It will give an impetus to demand for affordable homes from first time home buyers.
Urbanisation is likely to be the biggest growth driver of the Indian economy. Hence, the time is ripe to focus on modernisation and development of urban infrastructure & real estate industry. To achieve this, as per the budget proposals, the government will encourage states and cities to undertake urban planning reforms and actions to transform our cities into ‘sustainable cities of tomorrow’. This will result in transit-oriented development with the efficient use of land resources, enhanced availability and affordability of urban land, and opportunities for all. More focus on urban infrastructure will further stimulate growth in Tier 2 and 3 cities. It will also enhance the overall quality of life of life for people.
In another booster shot for infrastructure development, the budget also proposed to increase the capital expenditure outlay for the financial year 2023-24 to Rs 10 lakh crore, 3.3% of GDP. This is significantly higher than the Rs 7.5 lakh crore allocated last year. The Centre has also hiked the allocation for 50-year interest-free loans to state governments for infrastructure development to Rs 1.3 lakh crore. The increased capital outlay and other proposals will provide a major boost to the infrastructure sector and also will have a positive effect on the wider economy, stimulating job creation and private consumption.
Overall, the impact of budget 2023-2024 is expected to significantly boost the infrastructure and real estate industry with incentives and tax reliefs announced. A significant rise in investment and development activities will help create jobs and enhance growth in the economy.