Affordable and rental housing, infrastructure get big boost
Considered ‘the Margaret Thatcher moment’ for the FM, Union Budget 2021-22 was literally a make-or-break event.
Considered 'the Margaret Thatcher moment' for the FM, Union Budget 2021-22 was literally a make-or-break event. The circumstances are unprecedented - it is the first Budget presented after a pandemic which shattered the economy globally, and in India. The impact of the pandemic has been catastrophic with early govt estimates indicating a 7.7 per cent contraction in FY 2020-21 – the biggest GDP growth plunge in over four decades. Expectations across sectors were at an all-time high, though the fiscal pressures on the Finance Ministry are nothing short of crippling.
As expected, healthcare got the highest priority in resource allocation and policy support, including Rs 64,180-crore outlays under PM Aatmanirbhar Swastha Bharat scheme. It bodes well for healthcare facilities and wellness-oriented real estate. Further, the FY 2021-22 capital expenditure outlay at Rs 5.54 lakh crore to ensure that the target of becoming a $5-trillion economy by 2025, is well on track. This will positively impact infrastructure, connectivity of Tier-II cities and job creation for SMEs and MSMEs, thereby benefitting the target customers of affordable housing.
For the 'Aam Aadmi,' personal tax relief by way of tax rate cuts or favourably readjusted tax slabs topped demand and the FM failed to deliver on it. An upward revision in the deduction limit under Section 80C (at Rs 1.5 lakh a year) was long overdue and increasing this limit would have increased disposable incomes, inevitably pushing up consumption. It would have also helped improve consumer sentiments across sectors, the real need of the hour. As anticipated, affordable housing and rental housing got a big boost with the govt extending the period for extra deduction of Rs 1.5 lakh available for loans up to March 31, 2022. This will keep demand buoyant for affordable housing in 2021 as well. Further, the extension of the tax holiday for affordable housing projects for one more year will help bring in more new supply within this segment. As per ANAROCK Research, affordable housing already accounts for more than 35 per cent of the supply across the top 7 cities in the country.
Infrastructure got a major push. Infra works proposed include building 8,500-km of highways by March 2022. There were big infra sops announced for poll-bound states including West Bengal, Tamil Nadu, Kerala and Assam. The govt. also announced the Bill to set up Development Finance Institution (DFI) providing Rs 20,000 crore to boost infrastructure projects. The Modi government has not lost sight of its USP of infra creation, which will help connect more areas and thus open them up for real estate development.
All in all, the Budget was broad-based with special emphasis on building robust healthcare infrastructure, physical infrastructure and affordable housing. It will result in job creation in the informal sector, which was severely impacted by the pandemic. Creating buoyancy in the job market will benefit the Indian economy in the long run. The focus on rural job creation will also give a boost to affordable housing, which will help increase housing demand in Tier-II and Tier-III cities.
(The author is Chairman, ANAROCK Property Consultants)