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 the real estate industry. Dr Niranjan Hiranandani, Vice Chairman, NAREDCO; Anil Harish, Partner, D.M. Harish & Co., Advocates; Rajiv Sabharwal, MD & CEO, Tata Capital; Srini Sriniwasan, MD, Kotak Investment Advisors; Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure; and Navin Makhija, MD, The Wadhwa Group, formed the august dais along with Anuj Puri, Chairman & Founder, Anarock, who moderated the session. Advocate. Anil Harish, Partner, DM Harish & Co analyzed the Budget and its implications.
Sandeep Runwal, President, NAREDCO Maharashtra, said that the Budget is a fine balance between sustainable growth and financial stability. He applauded the Finance Minister for her hard work in meeting the aspirations of the people through lowering income tax brackets and driving forward growth with increased infrastructure budget.
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 made an honest effort to reduce taxes from all the tax slabs, which is a great initiative,” he added.
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, he said 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.
He added: “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? 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. No one will invest in rental housing as returns are not working; people 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,” said Dr. Hiranandani.
Navin Makhija, MD, The Wadhwa Group observed that the Government wanted to take the development agenda to tier II and III cities, so it was an opportune time to look for development opportunities in these areas. He said that due to stiffening of interest rates, the cost of buying affordable housing had gone up.
He added, “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 industry experts felt that the move could impact housing sales. Said Srini Srinivasan, MD, Kotak Investment Advisors, “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 31st March 2023. Additional tax on REITS was a dampener, but overall, the Budget on housing was a good one.”
Rajiv Sabharwal, MD & CEO, Tata Capital, lauded the Finance Minister’s efforts to balance both the short and long-term growth measures. He maintained that though the Budget had not come up with any new proposal for the real estate industry, it has not dented the ongoing pace of growth, as the realty sector had caught a good momentum due to the Government’s push for the past two years.
He 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, quality construction, and timely delivery. There has been no impact on the realty market due to the 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 emphasized the need to cool the cost of capital in India. Anuj Puri, Chairman & Founder, Anarock, cautioned that foreign investors were finding the US market cheaper than India and were therefore preferring to invest there than in India.
Sanjay Dutt, MD & CEO, Tata Realty & Infrastructure, said that although the USA was becoming cheaper for investors, they preferred staying there instead of coming to India. “India needs 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.”