Expectations High for Real Estate in Union Budget 2024
The Indian real estate market is eagerly awaiting the Union Budget 2024, following a period of robust growth. The sector's contribution to India’s GDP is projected to increase from its present figure of 8% to an impressive 13% by 2025, with a long-term forecast predicting a market size of $1 trillion by 2030.
Key industry figures believe that policy reforms are essential to enhance transparency, streamline processes, and drive further expansion within the real estate sector.
"NITI Aayog’s Forecast of the Indian real estate industry reaching a market size of $1 trillion by 2030 underscores its favorable long-term outlook,” says Neeraj Sharma, MD, Escon Infra Realtors. He further elaborates on the anticipation of government initiatives to reduce input costs like fuel, steel, and cement. Sharma emphasizes the significance of granting long-standing demands for industry status and streamlined clearance procedures, which would give developers access to loans with more favorable interest rates and potentially unlock substantial tax benefits. These measures, he believes, would bolster the sector and fuel further expansion.
Key Demands of the Real Estate Sector
As a major contributor to GDP, the real estate sector continues to prioritize policy reforms focused on reducing construction expenses, securing industry status recognition, and implementing a single-window clearance system.
Mukul Bansal, MD of Motiaz, states, “India’s real estate market is expanding quickly due to rising housing demand. Strong expectations exist for the industry to receive industry status and implement a more effective single-window clearance system with the Union Budget 2024-25 drawing near. Fulfilling these enduring requests would invigorate the industry. But high taxes on basic goods like steel and cement have driven up the price of building a house. The 28% on cement is especially concerning because it highlights how quickly policy needs to change to keep up with demand.” He highlights the surging housing demand as a driver of this rapid market expansion, emphasizing the anticipation surrounding the upcoming Union Budget 2024-25. Bansal suggests that granting industry status and a more streamlined single-window clearance system are crucial for invigorating the industry. However, it is observed by Bansal that the escalating taxes on essential construction materials like steel and cement are also pushing up housing costs, particularly, he mentions, the 28% GST on cement, which underscores the urgent need for policy adjustments to maintain pace with the surging demand.
The real estate sector’s significance as a major employer, particularly of a substantial casual labor force, further reinforces the critical need to support the segment’s continued growth.
"The real estate industry plays a crucial role in driving growth in the Indian economy,” says Trisol RED’s MD, Shorabh Upadhyay. “One of its pressing needs is to obtain industry status.” Upadhyay elaborates that acquiring industry status would unlock benefits such as lower-interest loans, tax incentives, and other financial advantages for developers, crucial in today’s tight financial environment. It is noted by Upadhyay that despite a robust rebound in the sector witnessed in recent years, continued government backing remains essential to maintain its upward trajectory.
Focus on Commercial Real Estate and Infrastructure Development
"Commercial real estate stands as a pivotal driver of the country’s GDP growth, warranting high expectations from the government ahead of the Union Budget 2024-25,” says Sundaram Group CEO Harsh Gupta. Gupta highlights commercial real estate as a key driver of GDP growth and notes its expectations of government support in the coming Union Budget 2024-25. According to Gupta, granting industry status would facilitate increased access to credit and lower financing costs, crucial for meeting growth in demand. He further emphasizes the sector's anticipation of interventions targeting the 28% GST on cement and price reductions for steel and fuel. Streamlining approvals through a single-window clearance mechanism, is seen by Gupta as essential to maintain momentum and fuel entrepreneurship in the commercial segment.
These measures, alongside incentivizing sustainable and efficient practices, have the potential to further accelerate the sector's growth.
Pyramid Infrstructure’s Ashwani Kumar states, “Despite industry optimism, challenges still exist. Prices play a big role in the real estate market, and building new projects becomes more expensive due to high taxes on basic materials like steel and cement. We expect a streamlined approval process and implore the government to address this matter. One of the main industries in the country that creates jobs is real estate, so policies that encourage it will benefit the economy as a whole.” Kumar acknowledges persistent challenges, particularly concerning the impact of high taxes on essential materials like steel and cement that escalate project costs. He underscores the sector’s expectation for a more efficient approval process, particularly given that it serves as a major job creator across India. Kumar appeals to the government to address this matter as policies supporting the segment ultimately hold the potential to benefit the entire economy.