Decoding the Union Budget 2023 from a Real Estate Lens

The Union Budget 2022 presented by FM Nirmala Sitharaman is a committed effort toward the larger economic growth vision for the country, having touched upon all the elements critical to India's success story. The budget proposes progressive expenditure, stresses the need for infrastructure development and furthers the vision of Atmanirbhar Bharat via reforms for ease of doing business, cost of doing business, skilling talent pool and employment generation. It seems to be promising for real estate as well, incentivizing innovation and rapid infrastructure development in the sector. The increased outlay for both railways and the PMAY scheme are welcome moves for real estate.

The budget highlights a few priority areas—Green Goals, Tourism & Hospitality, Education & Skilling, Startups, Manufacturing & Duties, Infrastructure Upliftment and Taxation—that have the potential to guide the entire Indian economy to an accelerated growth trajectory.

Infrastructure & Real Estate on Growth Trajectory

While there were no direct reforms in the real estate segment, big initiatives to improve infrastructure will have a positive impact on real estate. One of the major allocations in this direction was towards the development and upgrade of the Indian Railway network, which received a capital outlay of 2.40 lakh crore (the highest ever and about 9 times of outlay made in 2013-14). The budget 2023 also extended 50-year interest-free loans to state governments for another year to spur regional infrastructure investment and additionally proposed to revive 50 airports, heliports, water aerodromes and advanced landing grounds to improve connectivity across India.

The allocation of Rs 10,000 crore per year for an Urban Infrastructure Development Fund (UIDF) for tier-2 and tier-3 cities will undoubtedly stimulate the real-estate markets in these towns, which have emerged as real estate development drivers in recent years. The larger budget allocation will hasten project completion and aid in home ownership in tier 2 & 3 cities.

Green Economy to Lead the Way

Another key program that the government has stressed is the undertaking of Green Initiatives. The government will launch a Green Credit Program under the Environment (Protection) Act to incentivize environmentally sustainable and responsive measures taken by companies, individuals and local bodies. It has also provisioned INR 35,000 crore for capital investments toward energy transition and net zero objectives, and energy security.

The initiative to reduce the dependency on fossil fuel imports and facilitate the transition to a low-carbon intensity economy through National Green Hydrogen Mission is commendable that goes beyond real estate and paves the way for India to become a dominant name in this sunrise sector.

Startups, Manufacturing & More…

To facilitate the growth of the economy through ease of doing business, the government has provisioned tax relaxation and incentivization for budding startups and manufacturing firms. It is also revamping the credit guarantee scheme for MSMEs from 1st April 2023 with an infusion of INR 9,000 crore in the corpus.

Steps to skill youth, improve employability and create a digital economy by expanding the launch of a unified Skill India Digital platform are commendable – this will prepare our youth for international opportunities and for employment opportunities generated through startup ecosystem and e-commerce expansion.

In Sum

In line with the previous year's efforts, the focus of the government remained on manufacturing, ease of doing business, a green economy and social impact. The continued emphasis on enhancing urban infrastructure in tier II and III cities would go a long way in making them high-growth regional nodes, while the customs duty relief on components across sectors would give impetus to the manufacturing sector. As for real estate, the increased outlay in infrastructure and the PMAY scheme are welcome moves.

Nonetheless, all these factors at play will come together and continue to consolidate India’s position as an attractive investment destination and strengthen its reputation as a competitive, high-growth?environment amongst the emerging economies in the world.