The Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman presented ‘Amrit Kaal’s’ first Union Budget before the Parliament on Wednesday, the 1st of February. The union budget for 2023 is expected to have a visible impact on the real estate sector. The government announced that additional measures will be taken to promote the real estate industry, including tax benefits and other incentives.
This is likely to attract more investors and provide impetus to demand, making real estate a lucrative investment option. Additionally, the government has proposed measures to increase the availability of credit, which will help fund infrastructure projects and make it easier for buyers to secure mortgages. With these measures in place, the real estate sector is set to benefit from greater investment opportunities, stronger demand, and overall growth.
The government has allocated an impressive 66% increase of over Rs 79,000 crore to the Pradhan Mantri Awas Yojana (PMAY). It has also proposed capping the deduction from capital gains on residential property investment under sections 54 and 54F at Rs 10 crores in addition to limiting the income tax exemption from the revenues of extremely valuable insurance policies.
These measures will improve the environment for investment in the real estate and infrastructure sectors. Additionally, lower capital gains would help taxpayers deduct the interest paid on borrowed capital and improvement of property in the cost of acquisition or improvement on transfer, reducing the capital gains.
The FM also placed emphasis on initiatives for green growth, such as green buildings, green mobility and policies for energy efficiency across all economic sectors. Development authorities (established or constituted by or under a Central or State Act) with the aim of developing or improving cities, towns, and villages, or providing housing, would be eligible for tax exemption on any revenue accruing to the body, trust, or commission.
Cities would be encouraged to become independent and sustainable through the efficient use of land resources, proper funding for urban infrastructure, transit-oriented development, increased availability and affordability of urban land, leading to more opportunities for all.
The Infrastructure Finance Secretariat will support all stakeholders in securing more private investment in infrastructure, especially the ones heavily reliant on public resources, such as railways, roads, urban infrastructure, and power. By implementing property tax governance reforms and ring-fencing user fees on urban infrastructure, cities will be encouraged to improve their creditworthiness for municipal bonds.
An Urban Infrastructure Development Fund (UIDF), similar to the RIDF, will be created using the priority sector lending shortfall. Public agencies can capitalise on this to build urban infrastructure in Tier 2 and Tier 3 cities, with the National Housing Bank overseeing the operations. The fund is anticipated to receive a contribution of Rs 10,000 crore.
Overall, the government is taking the right steps to boost investment in the real estate sector, which will certainly have a positive impact on the economy.
