The real estate industry is the second largest employer in India and plays a significant role in contributing to the country’s GDP. This industry supports over 200 sectors, including manufacturing and services, and any incentives provided can positively impact related companies. Fortunately, the real estate industry has received a significant push from the Union Budget 2023, which the Finance Minister of India presented. The budget has brought some welcome relief to the real estate market. This was much needed as the industry has been struggling for the past few years due to various factors like slowdown of economy, lack of demand, and regulatory hurdles. Let’s have a look at some of the noteworthy points in this year’s budget that can benefit the real estate sector significantly:
Increases Tax Slab
One of the most appealing aspects of the 2023 budget was the increase in the lowest tax slab rate from 5 lakhs to 7 lakhs. The new tax structure, including changes in the tax brackets and an increase in the tax rebate limit, is expected to bring greater financial stability to the market. As a result, individuals will have more disposable income, which they can use to invest in property and drive the growth of the real estate market.
During the budget announcement, the finance minister highlighted the government’s initiatives towards promoting green fuel, energy, farming, mobility, buildings, and equipment and ensuring efficient energy utilization across various economic sectors. These measures towards green growth are expected to reduce the economy’s carbon footprint while creating job opportunities in the green industry. Specifically, promoting green buildings is a crucial aspect of these initiatives.
Preparing Cities for Issuing Municipal Bonds
As part of the budget announcement on February 1st, Finance Minister Nirmala Sitharaman stated that cities would be incentivized to improve their creditworthiness, enabling them to issue municipal bonds. Municipal bonds are debt instruments that corporations can issue under municipal laws with the permission of state governments. The funds generated through these bonds are typically used to finance projects aimed at socio-economic development, such as building schools, hospitals, and bridges in cities.
Establishment of Urban Infrastructure Development Fund (I-JIDF)
The budget 2023 proposed the establishment of an Urban Infrastructure Development Fund (I-JIDF) that will function similarly to the Rural Infrastructure Development Fund (RIDF). The I-JIDF will be created by utilizing the shortfall in priority sector lending and will be supervised by the National Housing Bank. The fund will be used by public entities to develop urban infrastructure in Tier 2 and Tier 3 cities. To access the I-JIDF, states will be encouraged to combine resources from the grants of the 15th Finance Commission and existing programs and implement appropriate user fees. The budget has allotted 10,000 crores annually for this purpose.
Building Sustainable Cities of Tomorrow
The Union Budget 2023 aims to motivate states and cities to implement urban planning changes and initiatives to make our cities more sustainable in the future. This involves efficient utilization of land, sufficient funding for urban infrastructure, development centered around public transportation, improved access to and affordability of urban land, and equal opportunities for all. The goal is to build sustainable cities that can meet the needs of the present without compromising the ability of future generations to meet their own needs.
Overall, the 2023 budget has brought some positive news for the real estate market, which has been eagerly waiting for some relief. These measures are expected to boost the demand for affordable housing and encourage the development of new real estate projects, which will have a positive impact on the sector as a whole.