Finance minister Nirmala Sitharaman presented her seventh consecutive Union Budget today. Focusing on the Budget theme, Sitharaman said, “Turning attention to the full year and beyond, in this Budget, we particularly focus on employment, skilling, MSMEs and the middle class.”
Budget 2024: Big announcements and industry reactions
Pradhan Mantri Awas Yojana
Taking the Pradhan Mantri Awas Yojana (PMAY) forward, the finance minister mentioned that three crore additional houses will be constructed under PMAY, of which one crore urban poor will be addressed under the PMAY Urban. For this, the centre will invest around Rs 10 lakh crore, and this will be inclusive of the Rs 2.2 lakh crore central assistance that will be provided for the next five years.
Amit Sinha, managing director and CEO, Mahindra Lifespace Developers, said, “We welcome the focus on urban development and growth hubs. The allocation of Rs 10 lakh crore under the PM Awas Yojana, including interest subsidies, will make housing much more affordable for the urban poor and middle class.”
Reduction of rate of long-term capital gains tax
In her Budget speech, FM announced reducing the long-term capital gains (LTCG) on property from 20% to 12.5%. However, she also announced removing the indexation benefits attached to property sales.
According to Archana Tewary, partner, JSA Advocates and Solicitors, real estate assets have been traditionally considered an attractive investment class due to indexation benefits available to such investments. In the budget announced today, while the reduction of the rate of long-term capital gains tax on sale of real estate assets is welcome, the removal of indexation benefits may hurt sellers. Although we must appreciate the overall intent to simplify taxation, such a change may particularly hurt individual sellers or middle class sellers who had invested in real estate with the intention of eventually benefitting from market value rising. This may overall reduce the demand for residential real estate projects – the impact will have to be seen.
Rationalisation of stamp duty
Stamp duty is a significant price component to be paid while buying a property. This one time charge has to be paid to the state government to register your property in government records. As this substantially increases the property costs, there has always been a demand to moderate the stamp duty costs. In her Budget 2024 speech, Sitharaman said, “We will encourage states which continue to charge high stamp duty to moderate the rates for all, and also consider further lowering duties for properties purchased by women. This reform will be made an essential component of urban development schemes.”
Welcoming this recommendation, Sinha mentioned that encouraging states to reduce high stamp duties, especially for women, is a commendable step towards inclusive growth.
Chintan Sheth, chairman and managing director, Sheth Realty, said, “The budget has touched upon a significant step towards addressing our nation’s housing needs. Encouraging states to moderate stamp duty is a noteworthy step to boost home ownership. Additionally, the further reduction in stamp duty for women homebuyers is a welcoming move.”
Rental housing
In her Budget speech, Sitharaman said, “In addition, enabling policies and regulations for efficient and transparent rental housing markets with enhanced availability will also be put in place.” These will be dormitory style rental housing for industrial workers and will be developed in PPP model.
“The focus on rental housing through dormitories in industrial parks via the PPP model, and the sanctioning of 12 new industrial parks, underscores a robust vision for urban development. With sustained infrastructure impetus, reflected in the Rs 11.11 lakh crore Capex allocation, we anticipate a significant boost in affordable rental housing for industrial labourers,” said Niranjan Hiranandani, chairman, Hiranandani and NAREDCO.
Transit-oriented development
To help cities to become growth hubs, the government is working on transit-oriented development for 14 large cities with population above 30 lakh. The implementation and financing strategy is on the works.
“India is emerging as a global office hub, with its real estate sector valued at $300 billion and employing 7 crore people. This sector drives economic activity, FDI, and infrastructure development, contributing to India’s role as a GCC hub and creating millions of jobs. The government’s focus on creative urban redevelopment and human capital development, including plans to skill and employ youth, further enhances India’s position as a modern, sustainable commercial hub,” said Ramesh Nair, CEO, Mindspace Business Parks REIT.
Seconding this, Atul Bohra, Group CEO, Kolte-Patil Developers, said, “We commend the emphasis on sustainable development through solar and renewable energy, city planning and transit-oriented development, which will create more liveable, sustainable urban spaces that elevate the quality of life for residents.”
Land mapping
Focusing on land mapping, Sitharaman said that Unique Land Parcel Identification Number (ULPIN) or Bhu-Aadhaar will be used for all rural lands, while GIS mapping will be used to digitise urban lands.
“Initiatives like digitisation of land records and GIS mapping, combined with workforce skilling, will have a multiplier effect on the real estate sector,” pointed Bohra.
What was absent in Budget 2024?
The Indian real estate segment has been asking for industry status and single window policy for a long time, something that was not touched upon even in this Budget 2024. Industry status comes with a lot of sops that will strengthen the segment’s performance and thus contribute much higher to the economy, believe experts. A single-window policy will iron out the bureaucracy and make grants of permissions easier, therefore resulting in faster project construction and delivery. An interesting point to note here is that while the central government has still not touched on this issue, the Tamil Nadu state government has launched the single window clearance portal where one can get permission to develop small residential buildings through self-certification. Important segment-related issues such as land liquidity and income tax exemptions were also important issues for which the segment was looking for redressal. “The real estate sector was anticipating measures on decreasing materials costs and more on the growth front of the sector,” mentioned Sheth.
Housing.com POV
While the Budget 2024 touched upon real estate as a segment in this Budget, it wasn’t in line with the hopes and expectations of the homebuyers and the industry in a large way. It didn’t touch upon most of the needs of the segment, leave alone the wants. However, industry sentiments looms on the fact that this Budget has paved the way that will help the segment in a big way going forward.
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