How Budget 2023 impacts architects, designers and real estate in India

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How Budget 2023 impacts architects, designers and real estate in India

The 2023 Union Budget of India presented by the Minister of Finance of India on February 01, 2023 shows an indirect push towards the infrastructure and real estate sector. Here are the major reforms.

The national budget of India offers numerous opportunities to strengthen Indian cities through investment in urban infrastructure and development projects. The following are some of the key opportunities offered by the national budget:

1. The outlay for PM Awas Yojana is being enhanced by 66 per cent to over Rs 79,000 crore.

2. Capital gains can be avoided by investing proceeds of such gains in residential property. This is proposed to be capped at Rs 10 crore under sections 54 and 54F.

3. There are certain assets like intangible assets or rights for which no consideration has been paid for acquisition and the transfer of which may result in generation of income. Their cost of acquisition is proposed to be defined to be NIL.

4. It is proposed to provide exemption to any income arising to a body or authority or board or trust or commission, (not being a company) which has been established or constituted by or under a Central or State Act with the purposes of satisfying the need for housing or for planning, development or improvement of cities, towns and villages or for regulating any activity or matter, irrespective of whether it is carrying out commercial activity.

5. The newly established Infrastructure Finance Secretariat will assist all stakeholders for more private investment in infrastructure, including railways, roads, urban infrastructure and power, which are predominantly dependent on public resources.

6. One hundred critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer, and food grains sectors have been identified. They will be taken up on priority with investment of Rs 75,000 crore, including Rs 15,000 crore from private sources.

7. Urban Infrastructure Development Fund (UIDF) will be established through use of priority sector lending shortfall. This will be managed by the National Housing Bank, and will be used by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities. States will be encouraged to leverage resources from the grants of the 15th Finance Commission, as well as existing schemes, to adopt appropriate user charges while accessing the UIDF. Government expects to make available Rs 10,000 crore per annum for this purpose.

8. It is proposed to provide a time limit for an SEZ unit to bring the proceeds from exports of goods or services into India. The filing of income-tax return is also proposed to be made mandatory for claiming deduction on export income.

9. To enhance business activities in GIFT IFSC, delegation of powers under the SEZ Act to IFSCA to avoid dual regulation will be done. A single IT system window for registration and approval from IFSCA, SEZ authorities, GSTN, RBI, SEBI and IRDAI willbe set up

In conclusion, the national budget of India offers numerous opportunities to strengthen Indian cities and improve the quality of life for their residents. By investing in urban infrastructure, supporting smart city initiatives, promoting sustainable development, encouraging public-private partnerships, providing tax incentives, and investing in urban governance, the national budget can help ensure that Indian cities are able to meet the challenges and opportunities of the 21st century.

Budget 2023 from the POV of Real Estate leaders

Kunal Savani, Partner, Cyril Amarchand Mangaldas:

“Capping of long term capital gains tax exemption on acquisition of real estates to INR 100 million is a major speed breaker for luxury real estate projects. Contrary to the intention of these provisions i.e. to mitigate shortage of housing, such provisions exempting capital gains on acquisition of residential house were frequently used by HNI’s/UHNIs for offsetting their gains on sale of prime residential houses or on sale of other eligible capital assets (mainly equity shares). Quite a few unicorn promoters and key management team members holding stock options have taken advantage of these provisions and invested in luxury residential properties. Accordingly, in order to curb these practices, the government has now proposed to curtail the benefits available under these provisions to the extent of INR 100 million.”

Mr. Deepak Goradia, Chairman and Managing Director- Dosti Realty:

“The Budget for 2023 is an overall positive one that is pro-growth and balanced. Though many points from the real estate wish list were not touched upon directly there will be a welcome impact on the sector. The enhanced outlay for PM Awaas Yojana by 66 percent to over Rs. 79,000 Crore is a major positive for the real estate sector. This budget creates the groundwork for the India blueprint in the time of Amrit Kaal. It is exciting to see infrastructure development and green growth feature among the Finance Minister’s seven priorities. The new income tax slabs will provide buyers with more spare income to spend on their ideal homes, while increased infrastructure and capital investments will play a significant role in urban housing and employment growth.”

Prasad Vaidya, Director, Solar Decathlon India:

“It is heartening to see the Green Growth priority in the budget, especially because it is directly linked to India’s Panchamrit goal of net-zero by 2070. Allocations for the Green Hydrogen Mission, battery and energy, skilling in green technologies etc. are on the mark. However, other than a possible indirect link in the Green Credit incentives for environmentally sustainable actions by companies, the budget misses out on the opportunity to begin serious decarbonization of buildings and the real estate sector, which accounts for a third of India’s emissions. Homes and workplaces are our first defense against the impacts of climate change like heat waves, storms, and floods. We need climate resilient, net-zero-energy buildings to achieve our 2030 and 2070 goals. Perhaps the 79,000 Cr for the PM Awas Yojana allocation for affordable housing can be integrated with the Green Growth priority to decarbonize new construction and make all new housing climate resilient.”

Mr. Cyril Shroff, Managing Partner, Cyril Amarchand Mangaldas:

“By laying a significant emphasis on Capex and Energy Transition, the FM has provided foundation for strong anti-cyclical momentum that should enable robust domestic economic growth and help counter the expected global headwinds. The focus on making India future ready by way of AI labs, Agri-tech, R&D in healthcare, further boosting Digital Public Infrastructure and holistically expanding physical infrastructure, auger very well for sustained long term economic growth.”

Mr. Sahil Virani, Managing Partner – Empire Realty (Virani Group):

“The budget for the year 2023-2024 did not emphasize much on the real estate sector The sole focus was on ‘PMAY’ with the increased budget allocation and CLSS benefits. It looks positive to boost the demand amongst the LIG and EWS groups. However, the industry was hoping for some boost in terms of lowered interest rates, subsidies for first-time homebuyers, reduced cost to production (reduction of prices for steel, cement), provision of single clearance window, better credit facility to developers, sound policies to support women homebuyers, etc. to further boost the demand in the real estate segment on a large scale. We would anticipate and hope that the next budget could be an ease for the industry on the whole.”

Mr. Ajay Choudhary, CMD, Ace Group:

Mr. Ajay Chaudhary, CMD, Ace Group opined, “We welcome the Union Budget 2023 for its significant announcements enabling the real estate sector to march on the growth trajectory. The announcement like increased income tax rebate limit from Rs 5 lakh to Rs 7 lakh in new tax regime will sustain demand creation in both affordable and luxury housing segments. Apart from giving more disposable income in the hands of the consumers, the concerted focus of this budget on encouraging reforms in urban planning will further boost India’s already thriving real estate sector.”

Mr. Rizwan Sajan – Chairman and Founder of Danube Group:

“Budget 2023 will help drive growth in the Indian realty sector with its emphasis on upgrading infrastructure and boosting demand in the residential segment. The demand for luxury properties has been already growing rapidly and we expect the market to become much more favourable for the HNIs to invest on the back of the increased thrust of the government on boosting the urban infrastructure.”