A Real Estate Push and Infra Boost: Union Budget 2022-23 Highlights with Industry Status

Union Finance Minister Nirmala Sitharaman

Union Finance Minister Nirmala Sitharaman presented the Union Budget 2022 for the fiscal year on Tuesday. Delivering the budget, she exclaimed that the country is expected to bounce back in the economy with a sharp growth of 9.2 per cent in this financial year. For the Narendra Modi-led government infrastructure has always emerged as the topmost priority.

FM Sitharaman said that the budget for 2022-2023 will lay the foundation for economic growth through public investment as Asia’s third-largest economy emerges from a pandemic-induced slump. The budget stands strong on the four pillars of inclusive development, productivity enhancement, energy transition and climate change as it drafts the picture of India at 75 to India at 100.

 

As the presented budget lists down pressing needs to ensure the economy is robust, Surfaces Reporter (SR) brings forth the highlights of Budget 2022 for the construction sector alongside industry experts and real estate leaders’ views and reactions.

Rise in infra and construction stocks

After FM Sitharaman’s announcement stating the Union Government aims to further grow the highway network by 25,000 km in 2023, the infrastructure and construction stocks witnessed a higher intraday. Since execution of national highway projects has been one of the highlights of the Modi-led government in the past, building materials and construction companies are hoping for higher tendering activities from the National Highways Authority of India (NHAI). According to Money Control, stocks including PNC Infratech, Ashoka Buildcon, KNR Construction, Gayatri Projects, ILandFS Engineering and Hindustan Construction gained 3-5 per cent each.

PM Gati Shakti for quicker transportation

PM Gati Shakti, which is sparked by the seven engines of roads, railways, airports, ports, mass transport, waterways and logistics is expected to advance the economy. According to FM Sitharaman, the PM Gati Shakti Master Plan for Expressways is expected to come into being in 2022-23 and is expected to help in quicker transportation. The National Highway network will be expanded by 25,000 km in 2022-23 with an investment of Rs 20,000 crore.

Radha Dhir, CEO and Country Head, India, JLL, called the PM GatiShakti scheme as on ‘overarching umbrella for all infrastructure augmentation plans.’ “PM GatiShakti is a great push towards making logistics and supply chain much more efficient with reduced logistics costs for all stakeholders. Aligning the National Infrastructure Pipeline under this umbrella, the seven engines of change are roads, railways, airports, ports, mass transport, waterways and logistics infrastructure. Also, the creation of a Unified Logistics Interface Platform will enable a reduction in logistics cost and time,” she informed.

Affordable housing

As for affordable housing, a panel will be set up for urban planning and 80 lakh affordable houses worth Rs 44,000 crore under PM Awas Yojna will be completed in 2022-23. That said, 60,000 houses will be identified as beneficiaries for PM Awas Yojana in rural and urban areas.

According to Anuj Puri, Chairman, ANAROCK, “If we consider numbers in terms of the new supply as well, back in the pre-Covid year of 2019, affordable housing share stood the highest – 40 per cent of the total 2,36,560 units launched across the top seven cities then. While in 2021, the affordable new supply share come down to 26 per cent for nearly the same number of units launched in the top seven cities (approx 2,36,700 units). Not to say that demand for affordable homes had diminished because it still has the maximum demand in India. It’s just that buyers went into a wait and watch mode. Affordable housing demand will gain momentum once the economic impact of the pandemic begins to subside for this target audience.”

Renewing the MSME sector

As anticipated, the FM also tried to rejuvenate the MSMEs sector which has a multiplier impact on the growth of the overall economy. The ECLGS scheme has been extended till March 2023 for the MSMEs. Besides providing an impetus to the industrial development, this move is likely to have a rub-off effect on the real estate sector as well given that the catastrophic impact of the pandemic on this sector (MSMEs) slowed down the demand for affordable housing in 2021. The home loan eligibility for many affordable housing buyers had been impacted by the pandemic due to loss of jobs and many MSMEs had been shut down, thereby resulting in significantly lower sales in this category.

As Mr Manish Bansal, Director, Window Magic, he finds the budget neutral from an MSME point. He further stated, “The government is giving a lot of emphasis to digitalization in every aspect, be it crypto currency being recognized and e-passport; whereas MSME and business-owners are concerned, there is no change in tax though there was an expectation of change in taxes to support the MSME. However, ECLGS has been a boon for MSMEs in the pandemic, and this extension and the increase in allocation is a great move, which might help the overall economy once there is a good cash flow.”

Post offices under banking system and other reforms

Also, to facilitate digital inclusion and aid fund transfer, 100 per cent of 1.5 lakh post offices will come under the complete banking system. “This will enable smooth and transparent real estate transactions in the rural areas and also encourage loan disbursal to the semi-urban population. Increased focus on Tier II and Tier III cities for urban development, a high-level panel for urban planning and data centres receiving infrastructure status will give an impetus to this segment of the real estate sector,” added Mr Puri.

The budget casts its attention towards training and development of urban planning practice by ways of setting up six centre of excellence with budgetary support. According to Mr Subhankar Mitra, Managing Director, Advisory Services, Colliers India, since land is mostly state subject, hence a special interest free loan for 50 years is offered to the state government who would participate in the reform process announced by the Central Government. It is expected to incentivise the state governments to collaborate with the Centre to fast track the reforms.”

Infra spending in PPP mode

Mr Pritam Chivukula, Co-Founder and Director, Tridhaatu Realty and Treasurer, CREDAI MCHI emphasized on the infra spending in PPP mode which seems to be the thrust of the Union Budget 2022. “Through Ease of Doing Business 2.0, the government continues to encourage digitization and fin-tech innovation. The focus on creation of digital infra, single portal for ease-of-doing business and digital skilling will strengthen the start-up ecosystem,” he added.

Mixed reaction from industry experts

An optimistic Mr Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani exclaimed, “Budget 2022 has set the tone for the modern India that will be built on a strong foundation of planned cities with high capital expenditure towards a robust network of infrastructure and technology. Our cities have been built with the age-old laws and there was a dire need to refurbish them as per modern day-to-day requirements and needs. The focus on modernizing building, infrastructure laws and town planning displays that we are gearing to envision a new India with smart and tech-led planned cities. Also, equal focus on infrastructure, sustainability and technology will have a multiplier effect by creating more job opportunities and consumption demand.”

Although, for Mr Jitesh Lalwani, President, HomeSync Real Estate Advisory, the desirable budget makes efforts to increase private capital in the infrastructure sector, the real estate sector was further eyeing SOPs such as relaxation in GST on under-construction properties, a reduction of GST on key raw materials, a higher interest exemption for homebuyers and above all, the long-awaited demand of granting infra status to the sector.

On similar lines Mr Amit Goyal, CEO, India Sotheby’s International Realty mentioned that other than the allocation of Rs 48,000 crore to housing projects under PM housing scheme, no big reforms or incentives were announced for the real estate sector. “It’s a missed opportunity for the real estate sector as incentives in the form of higher deductions against home loans, changes in incongruities related to real estate transfer and others might have improved the market scenario and triggered the demand and sales process in the real estate sector. Real estate sector being a major contributor to India’s GDP needs more focus from the government,” he added.

On the contrary, Mr RK Arora, Chairman, Supertech Ltd said, “The government has treaded a line of fine balance to lead the economy to high GDP growth rate by investing in infrastructure sector yet keeping the fiscal deficit within manageable limits. In the backdrop of ambitious housing for all, PMAY has been given due importance, however largely through government’s flagship programmes rather than the incentives real estate development companies were hoping for.”

As the real estate is looking forward to the budget post the two wave of the COVID-19 pandemic, Mr Pankaj Bansal, Director, M3M India, added, “The demand towards investments in real estate from young millennial will only increase with the relaxation in taxes and rebates by the government in the Union Budget 2022.”

Image credits: Fortune India

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