The Union Budget has given the real estate sector a much-needed boost, with various measures announced to promote investment. By studying these takeaways from Budget 2023, investors can better understand how this could shape their investments in India.
Key Insights from the 2023 Budget for Real Estate Investors
- Indian economy on the right track
The country's economic growth in the current year is estimated at 7 per cent - among the highest across all major economies.
Notwithstanding the global impact of Covid-19 and other challenges, the country approaches a bright future.
- Infrastructure & investments - an important driver of progress
After a subdued pandemic period, the budget retakes the lead to boost investment, job creation, and cushion against global headwinds.
Notably, in Budget 2023:
- Effective Capital Expenditure: The continuing emphasis on infrastructure development saw capital expenditure enhanced to an effective amount of INR 13.7 lakh crore (4.5% of the GDP).
- Support to State Governments for Capital Investment: The continuation of interest-free 50-year loans to state governments for another year, with an enhanced outlay of INR 1.3 lakh crore, supports infrastructure development.
The Infrastructure Finance Secretariat will assist all stakeholders with more private investment in infrastructure, including railways, roads, roads, urban infrastructure, and power - which primarily depend on public resources.
At a glance: Budget 2023 has provided for:
- Railways: The highest capital outlay of INR 2.40 lakh crore.
- Air Connectivity: 50 additional airports, heliports, water aerodromes, and advanced landing grounds will be revived to boost regional air connectivity.
- Coastal Shipping: Will be promoted as energy-efficient and cost-effective transport - for passengers and freight - through PPP mode with viability gap funding.
- Logistics: 100 critical transport infrastructure projects for connectivity for ports, steel, coal, fertilizer, and food grains sectors will be prioritised. An investment of INR 75,000 crore has been earmarked, including INR 15,000 crore from private sources.
The increased allocation to railways and emphasis on regional connectivity will lower overall transport and logistics costs. It will also boost demand for supply chain efficiencies and specialised commercial real estate.
- Urban planning is prioritised in Tier 2 and Tier 3 cities
The budget has proposed INR 10,000 crore to allow public agencies to develop infrastructure such as residential, commercial, and retail developments, further bolstering local economies while aiding real estate growth.
According to Mr Ramesh Nair, CEO, India, Colliers, “Dedicated investment of Rs 10,000 crore through the urban infra development fund will result in the creation of quality of urban infrastructure thereby improving quality of life and translate into higher demand for housing and commercial real estate.”
- Focus on Green Growth
The goals of an environmentally conscious lifestyle and net-zero carbon emission by 2070 have been addressed in the budget.
- Green Initiatives: Many programmes for green fuel, energy, farming, mobility, and even green buildings and green equipment are being implemented with policies for efficiently using energy across various economic sectors. These efforts will not only help reduce the economy's carbon intensity and provide for large-scale green job opportunities.
- Green Credit Programme: This initiative, which will be notified under the Environment (Protection) Act., will incentivise environmentally sustainable actions by companies, individuals, and local bodies and help attract additional resources for these efforts.
- Sustainable Cities of Tomorrow : According to Dr Samantak Das, chief economist and head of research and REIS, India, JLL, “Addressing the need for creating sustainable cities of tomorrow will be key towards sustainable development moving forward.”
Budget 2023 emphasises that states and cities will be encouraged to implement urban planning reforms that help make our cities sustainable. This implies better urban planning and infrastructure, efficient use and greater availability and affordability of urban land, transit-oriented development, and more opportunities for all.
This is particularly significant for the commercial real estate sector as it indicates the potential for developing more economic centres in the country.
- Push for industry
Pharma: While galvanising pharma R&D through centres of excellence, the Budget 2023 also outlined the need for industry participation in specific priority areas. This will likely boost R&D activity and spur the demand for such facilities in specialised zones nationwide. This, in turn, will drive more investment and increase the need for specialised commercial real estate.
Tourism: Likewise, the budget proposed the need to maximise the country’s tourism potential across at least 50 destinations. This will further drive economic activity with increased demands for hotels and other tourism-related jobs and infrastructure.
5G: The budget also announced setting up 100 labs in engineering institutes for developing applications using 5G services. The key objective is to create new opportunities, business models, and employment potential. This will also translate into increased demand for specialised real estate.
Marine Products and Lab-Grown Diamonds: The vast potential of marine products and lab-grown diamonds have been explicitly addressed by reducing the duty on key inputs required by these industries.
Electric Vehicles: To further encourage green mobility, the customs duty exemption is being extended on imports of capital goods and machinery needed to manufacture lithium-ion cells for electric vehicle batteries.
Others: The budget also has laid out incentives for boosting domestic manufacturers, especially in mobile phones, TVs, and appliances like electric chimneys. It has also announced custom duty relaxations on certain chemicals to make the industry more competitive.
To Conclude
Overall, the 2023 budget impact on real estate investors is positive. It facilitates growth opportunities for start-ups, technology, and MSMEs by enhancing urban infrastructure, technology, and inclusive development.
These positive indicators point towards job creation, increased investments, and the need for high-quality offices and greenfield manufacturing facilities over a sustained period.
However, some key points to remember while investing include:
- Conduct adequate research on the current market conditions.
- Assess the potential impact of any proposed policy changes.
- Look out for incentives.
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