How Budget 2024 announcements will spur balanced growth of real estate sector

By Binaifer Jehani and Abbas Master
Budget 2024: Real estate, a significant contributor to employment generation, has received a fair bit of attention in Budget 2024-25. Recent years have seen the sector transform rapidly, driven by factors such as favourable government policies, Real Estate (Regulation and Development) Act, 2016, strong economic growth and changing consumer preferences.
Added to that, the budgetary focus on job creation, skilling and employment-linked incentives, infrastructure, urban development, rural connectivity, digitalisation and land-related norms, all dovetail to promote growth of the sector.
A look at the five key focus areas of this budget reveals the good augury.
Affordable housing through Pradhan Mantri Awas Yojana (PMAY)
Launched in June 2015, the PMAY aims to provide affordable housing to all eligible beneficiaries. The budget unveiled PMAY Urban 2.0, under which the housing needs of 1 crore urban poor and middle class will be addressed with an investment of Rs 10 lakh crore.
The central government’s additional Rs 2.2 lakh crore injection in the next 5 years to make housing more affordable has the potential to revitalise the affordable housing market.
Such an approach can play an important role in realising the government's vision of Housing for All and push growth and development. Hence, the significant investment under PMAY Urban 2.0 is expected to alleviate urban housing deficits, spurring construction and economic growth.
Digitalisation and transparency: Stamp duty rationalisation and land-related reforms
Steps to introduce technological reforms within the regulatory framework for land, such as digitalisation or GIS mapping of land records, will improve transparency.
Rationalisation of stamp duty across states will also be critical to bring in uniformity and initiate land-related reforms such as urban planning, usage and building bylaws.
These are steps in the right direction and will boost growth. Moreover, they will improve the ease of property transactions and strengthen municipal finances through increased property taxes. Rationalization of stamp duty with an emphasis on women homebuyers may boost home-buyer sentiment in major cities, too.
Boost to urban and industrial development with focus on industrial workers
The budget has also given ample attention to urban and rural development, with rental housing for industrial workers through the public private partnership model, interest subsidies for rental housing, and transit-oriented developments.
The proposal to develop investment-ready plug-and-play industrial parks in 100 cities may attract industrial investment, leading to increased demand for industrial real estate and support the growth of ancillary services and residential developments in these regions.
Initiatives for industrial parks and rental housing for industrial workers align with the country’s manufacturing goals and addresses worker accommodation needs.
These steps are expected to promote industrial growth and stability in labour-intensive sectors, while also creating new opportunities for real estate developers specialising in rental and affordable housing.
Reduction of capital gains tax, with removal of indexation benefits
The changes in long-term capital gains (LTCG) tax, however, have evoked a mixed reaction. The government lowered the long-term capital gains tax from 20% to 12.5%, which is a welcome step. However, this came with the removal of the indexation benefit.
The changes could encourage more liquidity in property transactions and potentially increase the effective tax burden depending on the property’s acquisition date.
Rural connectivity and development
The launch of Phase IV of the PM Gram Sadak Yojana in 25,000 rural habitations will improve connectivity in rural areas, promoting rural development and making these regions more accessible for investment. The primary objective of PMGSY is to build robust, all-weather roads in rural habitations. This initiative focuses on enhancing connectivity and supporting economic development in rural areas.
In essence, the budget is geared towards stimulating growth and investment in the real estate sector, fostering a more transparent and investor-friendly environment, and contributing to overall development. It aims to create a balanced and inclusive growth environment by addressing the needs of various segments, including affordable housing, industrial workers and urban infrastructure.
The effectiveness of the initiatives, however, hinges on their implementation and continued support of complementary reforms.
Binaifer Jehani is Business Head - MI&A Assessments, CRISIL Ltd and Abbas Master is Associate Director - MI&A Assessments, CRISIL Ltd.