In 2021, the real estate business has been thriving. Budget 2022-23 appears to depend on demand-supply economic fundamentals to fuel development in the coming year, with the belief that the advantages of structural reforms put in place over the last five years will keep the second biggest employer after agriculture in motion.
In 2021, the industry has been strong, resulting in collapsing inventory levels all over marketplaces and expanded stamp duty collections all over major states, signalling noticeable results of a string of budgetary initiatives since 2018, spanning segments of REITs, affordable housing, capital gains exemptions, and improved developer funding. The general thrust of this budget for real estate is to keep the core of the economy alive with more government investment rather than direct sops to industries that have been running a four to a five-year cycle of structural improvements.
The finance minister has avoided common industry hopes of greater tax simplification in the form of GST reduction for under-construction properties, reductions in key raw material items, infrastructure status, and a larger interest exemption for house buyers. The Budget has managed to retain the core of the sector's demand through a combination of direct and indirect advantages generated from the construction of relevant infrastructure. In a pre-budget study conducted by Grant Thornton Bharat, 78% of respondents stated they expect a rise in the limit for tax exemption on home loan interest to promote demand.
The Prime Minister's Gati Shakti initiative, as well as government announcements to establish multi-modal logistics centres to connect urban transportation to railways, will spur large investments in logistics and warehousing. Increased institutional contributions will boost the industrial and commercial areas of real estate due to the infrastructure status of data centres. The proposed new legislation governing special economic zones (SEZs) should result in the improved potential for commercial and industrial development. The rise of significant industrial and commercial assets is likely to propel the real estate investment trust (REIT) narrative even further.
With a continuous emphasis on requirement fulfilment in the cheap housing category, the Rs 48,000 crore incentive will guarantee the momentum of the Pradhan Mantri Awas Yojana (PMAY) and a range of efforts for providing affordable housing in previous budgets is not abandoned. The government has also maintained its long-term commitment to fostering the development of smart and sustainable real estate in Tier 2 and Tier 3 cities by constructing urban planning centres of excellence.
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