The Indian real estate sector is neither large nor stable to support the economic growth in its hard times. This inaccessibility to a large market on its doorstep has imperilled the country’s identity in the global markets. While the Union Budget 2020 was expected to provide some relief to the ailing sector, inadequate measures by the Finance Minister has set forth a different scenario.
Over the years, there has been a massive difference in the budgetary allocation to other sectors and the real estate sector. The gap remained even more extensive in the Union Budget 2020. The only effective measure that the Finance Minister announced for the real estate sector was in the affordable housing segment. Apart from a increase in the tax holidays for affordable housing projects, no other substantial measure was announced that could restore the sheen of the real estate sector and revive the distressed economy.
The announcements in Union Budget 2020 seem inadequate to revitalise the real estate market of India that suffers from stalled projects, inventory glut and shortage of funds. Relief in the residential sector appears to be a far-fetched goal. The increment in the Income Tax interest exemptions has brought no relief to developers and will only aggravate the industry with the rise of scattered and unsold stocks. The accumulated stock in the real estate sector must start moving; otherwise, the domino effect of the economic slowdown would move towards the manufacturing and unorganised sectors which would further impact the economy negatively.
Rental housing policies
Presently, the need is for better rental housing policies inspired by the fundamentals of commercial leasing. The strategies in the commercial segment have been hugely successful in attracting Foreign Direct Investments (FDI) in the offices and warehousing sector. Perhaps, the scenario could have been even better if the EMIs on the residential projects were made tax free for a year, and a fair amount of fund was invested in assisting the ailing projects.
While the housing sector failed to get the finance minister's attention, transport infrastructure earned a spotlight. Along with multiple highways and road projects, the budget rekindled the developments in the airport infrastructure. The proposed construction of 104 new airports would result in a substantial increase in the infrastructural investment. The announcement of 'air cargo ports' for transferring agricultural produce from remote areas is a new model of investment in the infrastructure sector. Besides, the logistics parks primarily planned for agricultural produce, to help the local agrarian sector reach the global markets with a brisk rotation of economy is another measure that the government could have introduced to deal with the stress in the agricultural industry.
Overall, the budget should have provided more significant opportunities to propel the real estate economy. Measures would have been announced to increase the consumer demand, revive investment climate and accelerate growth. The real estate market has the potential to alter the identity of India’s economy worldwide, provided the problems in the sector are taken care of.