Sunday, July 14, 2024

Interim Budget 2024: Limited Focus on Real Estate with Emphasis on Affordable Housing and Middle-Class Initiatives

As expected, the Interim Budget 2024 did not include significant announcements impacting the Indian real estate sector. Finance Minister Nirmala Sitharaman focused on specific areas such as affordable housing, middle-class housing, rooftop solarization, and transit-oriented development.

Despite the challenges posed by COVID, the implementation of the Pradhan Mantri Awas Yojana (Grameen) persisted, and the goal of achieving three crore houses is nearing completion. Over the next five years, an additional two crore houses will be initiated to address the increasing demand due to the growing number of families.

Rooftop solarization is a key initiative, aiming to provide up to 300 units of free electricity per month to one crore households. Additionally, the government plans to launch a scheme targeting deserving sections of the middle class residing in rented houses, slums, chawls, and unauthorized colonies. The objective is to facilitate the purchase or construction of their own homes, as stated by the finance minister.

Industry reaction to the Interim Budget2024:

Ankit Hakhu, director, CRISIL Ratings said, “The plan for supporting solar rooftops in 1 crore households augurs well for developers and module manufacturers as it will bump up rooftop demand. It will also be attractive for households given the potential to save electricity cost of Rs15-18,000 per annum per household. That said, the quantum and mechanism of disbursements and timelines around the support will determine the pace of progress of the scheme and will bear watching.”

Ashoo Gupta, Partner, Shardul Amarchand Mangaldas & Co said, “The housing for middle class scheme is a commendable initiative that empowers the middle class to fulfill their dream of home ownership. This step is anticipated to boost economic growth, providing a sense of stability and prosperity within the middle-income segment.”

“While acknowledging the commendable strides, we believe that further catalysing growth in the real estate sector could have been facilitated through measures such as a reduction in customs duties or GST, enabling developers to expedite the completion of under-construction properties and boost housing supply,” said Venkatesh Gopalakrishnan, MD & CEO, Shapoorji Pallonji Real Estate.

G Hari Babu, national president, NAREDCO said, “The reiteration of anew scheme for the urban middle class population, also would boost confidence of both the common man and the real estate sector. We now look forward for a clear roadmap of this scheme.”

Murali Malayappan, chairman and managing director, Shriram Properties said, “The aim to reduce/contain the fiscal deficit to 4.5% by2025-2026 is good. The plan to build 2 crore more houses and launch anew plan for the middle class will be a booster for housing development and depict the concern of the government towards providing housing for all. Capex of Rs. 11.1 lakh crore in 2025 will be the biggest and most welcome. Hopefully, the government shall revisit the areas like affordable housing and tax provisions, particularly the Individual Income Tax which directly impacts areas like housing development and overall economic development, while submitting the regular budget.

Sandeep Runwal, president, NAREDCO Maharashtra said, “The announcement of a new housing scheme for the middle class is particularly noteworthy. This initiative seems to be aimed at addressing the housing needs of those living in substandard conditions like slums and chawls or those burdened by rent. By facilitating home ownership, the government is not only looking to improve living standards but also to stimulate the real estate sector and associated industries.”

“The vision of ‘Housing for all’ gains momentum with the announcement of a new housing scheme for the middle class and plans to build 2 crore houses in the next 5 years under the rural housing plan. Initiatives like rooftop solarisation are expected to reduce electricity bills, encouraging middle-class investment in affordable housing,” said Domnic Romell, president, CREDAI-MCHI.

Ashish Puravankara, managing director, Puravankara said, “The financial prudence being displayed in bringing down the fiscal deficit to an estimated 5.1% is fantastic. It shows that the government is committed to strengthening the economy, controlling inflation and, therefore, interest costs while maintaining growth with investments in infrastructure.”

Anuj Puri, chairman, ANAROCK Group said, “As anticipated, the Interim Budget 2024 made no big-bang announcements, but it continued its focus on infrastructure upgrades and building connectivity across the country. This will benefit real estate growth in not just the top cities but in Tier 2 & 3 cities across the country. While the interim budget didn’t directly address the real estate sector’s key demands, the upcoming Union Budget might hold more concrete measures addressing industry concerns and potentially impacting market trends.”

Vihang Sarnaik, Director, Vihang Group said, “A critical facet of my expectation from the Budget was the re-evaluation of affordable housing criteria. I was expecting that the Honourable Finance Minister would find some merit in establishing a separate affordable housing index for each Tier-1 and Tier-2 cities with impetus to the housing affordability in key Metro Cities and its Periphery.

While considering the affordability of housing, it was essential to consider factors such as inflation, land cost, construction cost, approval cost, and labour cost for defining affordability in housing. For instance, in the case of Mumbai, where housing costs are notably high, we thought that the interim  Budget would increase the price ceiling on affordable housing from ₹45 lakhs to ₹90 lakhs so that the whole affordable scheme benefits a large chunk of people living in the unorganised sector.

As per the current affordable housing scheme, the limit is set at ₹45 lakhs and you will not find a single home in Mumbai in that price bracket. So, the scope of availing the full benefit of credit link subsidy under PMAY is non-existent in Mumbai.”

Amit Goenka, MD and CEO at Nisus Finance, said “The budget maintains the status quo on many strong growth enablers for real estate and we can look forward to an excellent year for consumers, developers and financiers in the sector.”

Dr. Mohit Ramsinghani  – Chief of Sales – Runwal said, “With the Finance Minister announcing the scheme to focus for the middle class to those living in rented houses, it is a great move for the affordable housing segment to scale up and give a boost to the real estate sector.”

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