Budget 2023 and possible multiplier effect on the real-estate sector

The year 2022 was crucial for the real- estate sector as the industry recovered from a two-year slump, reflecting improved demand for residential real estate in the country. Magicbricks Research found that overall residential demand (searches) increased by 19 percent in 2022, led by major cities such as Mumbai (52.1 percent), Noida (35.8 percent), Gurugram (34.5 percent), Bengaluru (33 percent), and Delhi (14.8 percent) which also saw a massive increase in housing demand during the year. Another interesting insight offered by our reports is that 80 percent of potential homebuyers were looking for apartments in 2022, up from 67 percent in 2021.

The year 2023 began with a similarly promising outlook, and the industry eagerly awaited the Union Budget in the hope that it would open further opportunities to support rising demand and address the challenges facing the sector. At a time when the Indian economy has risen to become the fifth-largest economy in the world, growing at 7 percent, it was encouraging to see that the initiatives and programs announced in the budget have the potential to benefit the real estate sector directly and indirectly. With a revised tax structure, increased infrastructure spending, and a focus on affordable housing, the budget would play an important role in increasing market liquidity and facilitating economic growth.

Boost to affordable housing

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The highlight of the Budget was undoubtedly the commitment to affordable housing with the strategic decision to increase spending on Pradhan Mantri Awas Yojana (PMAY) by 66 percent! This decision gives a much-needed boost to the vision of “Housing for All”. Moreover, by increasing infrastructure spending by 33 percent, the government is attempting to boost economic growth, which would have a multiplier effect through job creation and investment, as well as a direct and indirect impact on the real estate sector.

Rationalizing tax rates would also increase the disposable income of the middle class and can potentially lead to an increase in demand for residential properties. In India, owning a home has always been considered a safety net, and real estate is a trusted asset class for investment. It is therefore expected that the rise in disposable income could encourage fence-sitters to take the plunge and buy their dream home.

Promoting urbanisation efforts

It is also encouraging to see that the government is maintaining its focus on promoting urbanization initiatives, particularly with the allocation of Rs 10,000 crores per year for an Urban Infrastructure Development Fund (UIDF) for Tier 2 and Tier 3 cities. This would certainly give a much-needed boost to these cities, which have proven to be growth engines for the real estate market in recent years.

According to Magicbricks Research, 2022 saw a year-on-year increase in demand for residential real estate in cities such as Bhubaneswar (12 percent), Coimbatore (27 percent), Jaipur (5 percent), and Nagpur (66 percent), and this initiative will further boost the quality-of-life index and attractiveness of these cities. The Budget could also potentially be the harbinger of new reforms and policies in the real estate sector, with a focus on green buildings and sustainable cities.

Overall, there is no denying that the Union Budget is positive and growth-oriented for the real estate sector and offers a promising outlook for 2023.

The writer is CEO, Magicbricks- an online real estate portal. He tweets @sudhirpai @magicbricks. Views expressed are personal.

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