The real estate industry was expecting incentives in the budget to drive demand industry status, easy availability of finance, and GST rates reduction, however, the budget focus was clearly on infrastructure to boost the economy.
Amit Bhagat, CEO & MD, Ask Property Investment Advisors Pvt. Ltd said, “In place of short term incentives, the budget’s overall focus on infrastructure development, SEZ and data centres is likely to have a multiplier effect on the real estate The government has allocated Rs 48,000 crore for the credit linked subsidy scheme (PMAY) which will be be neficial for first time buyers in affordable housing segment. These measures, I believe will create sustainable real estate demand in times to come.”
Shobhit Agarwal - MD & CEO - ANAROCK Capital expressed, “Government’s consistent focus has been on affordable housing, but from a developer perspective, it is the mid-income segment housing between 80 lakhs and 1.5 crore ticket size that is growing. The budget lacks push on the demand side, such as tax exemptions that would have helped incentivise purchase decisions.”
Ashwinder R Singh, CEO, Residential, Bhartiya Urban agreed, “In the last couple of years, the budget range has been between Rs 80 lakh and Rs 1.5, crore because that extra room the homebuyer needs is costing the extra amount. However, 90% of the buyers account for affordable housing that are mainly employed in the MSME sector, which is the largest in India. While, the mid-income buyers have not received any tax reliefs, the affordable segment buyers severely impacted by Covid economically are still in recovery mode, therefore at both ends the sentiments are impacted as they are in wait and watch situation.”
Neeraj Bansal, Partner & COO-India Global, KPMG India said, “Hopefully, the infrastructure spend will bring about sustainable housing demand with more job creation and overall economic growth. Additionally, the boost to logistics and industrial parks and manufacturing will create demand for commercial real estate across the country.”
Ambar Maheshwari, Chief Executive Officer, Indiabulls Asset Management Co.Ltd shared his views, “Indeed, the boost to other sectors like manufacturing, multi-modal logistic parks, Data centres and SEZ will generate demand for all asset classes of real estate and will attract private investment , that will lead to a huge amount of residential demand as well. So if other sectors and industries prosper, real estate too will see positive growth.”
Abhishek Sharma, Partner (Co Head-Real Estate), Cyril Amarchand Mangaldas talking about GST, the biggest pain point of realty sector stated, “Since 2019, GST has been an issue because of the disallowance of Input Tax Credit. It was discontinued as developers were not passing the benefits to the customers. The industry had hoped for reduction in GST on construction raw materials that was also not fulfilled in the budget.”
FUTURE PARADIGM SHIFTS
According to Shobhit Agarwal, till now the concentration of housing demand was in top 7 cities, however in the pandemic with people working from home from their hometowns, there is a strong housing demand in tier-II and III cities.
Amit Bhagat was of the view that residential real estate is definitely going to drive the next round of growth and infrastructure development can be the required shot in the arm. However, given the long gestation period of infrastructure projects, the demand will still be concentrated in top seven cities for next few years.
Ahswinder Singh mentioned the need for low cost of funds, ease of doing business and unlocking of lands by public private partnership that will help increase residential yields.
Ambar Maheshwari concurred, “Because of the negative arbitrage between rental and mortgage rates, the government will have to unlock their own land and build with PPP model to provide affordable housing.”
Neeraj Bansal shared that budget thrust has been on capex side rather than the demand side as seen in terms of REITs as well. Still REITs have remained an attractive investment option even during the pandemic.
Abhishek Sharma highlighted that government has been gradually adding various asset classes under infrastructure status from affordable to data parks now. Hopefully, commercial and residential might get added soon.
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