India’s housing sector had suffered a major jolt due to the consecutive onslaught of Covid 19 waves. However, with the economy rebounding strongly in the last few quarters, the housing sector has witnessed green shoots of revival, especially in tier 1 and tier 2 cities. In this context, the Union Budget has been in the spotlight to see what is in store for the housing sector.
In the Union Budget 2023-24, the government has focused on creating sustainable long-term infrastructural assets and unlocking their growth potential. So let’s see how the budget will give a fillip to the housing sector.
Big Points Related to Housing in Union Budget 2023
The Union Finance Minister presented this budget in light of several challenges faced on the internal and external fronts, like elevated inflation levels, higher input costs, lack of global demand, and tightening of monetary policies, which resulted in higher home loan rates.
Although headway was limited, and quite expectedly the government did not announce any big-bang reforms or big-ticket moves; it has focused on providing stability and sustainability to the sector.
Some measures introduced in the budget related to the housing sector are as follows:
- The total budgetary outlay under the affordable housing scheme, PM Awas Yojana increased by 66% to ₹79,000 crore. It is the highest outlay to date in this scheme since its launch in 2016. According to sectoral experts, it can usher in a fresh wave of demand in the affordable housing sector.
- An increase in capital outlay to ₹10 lakh crore, equivalent to 3.3% of India’s GDP, will have a positive multiplier effect on the urban and rural economy. It will ultimately lead to fulfilling India’s vision of ‘Housing for All’.
- The government has also introduced a dedicated fund in the budget to provide a boost to the urban infrastructure. Expansion and development of urban areas with modern technology will have a corresponding positive impact on the residential real estate sector.
What is the Pradhan Mantri Awas Yojana ?
The major talking point around this budget is the record allocation made to the affordable housing sector, i.e., Pradhan Mantri Awas Yojana (PMAY).. So let’s see in greater detail the intricacies related to this scheme.
- It is a Union Government scheme that provides housing to all citizens. The target beneficiaries of this scheme include, the economically weaker sections, lower-income and middle-income groups. There are sub-schemes under this, including the affordable rental housing complex, the global housing technology challenge and the Credit-linked Subsidy scheme which provides interest subsidy to avail housing loans.
- This scheme has two components: Pradhan Mantri Awas Yojana (for urban areas) and Pradhan Mantri Awas Yojana (for rural areas). This year, the total budgetary allocation for PMAY stands at ₹79,000 crore. Of this, around ₹54,000 crore is for Pradhan Mantri Awas Yojana for rural areas, and the remainder is for its urban counterparts.
Future Outlook of Housing Sector in Light of Union Budget 2023
The infrastructural push in the Union budget 2023 is expected to lend impetus to creating demand in the housing sector in years to come. It has been observed that when infrastructure develops in a region, it commensurately leads to proportionate demand for housing. Therefore, infrastructure development indirectly and positively impacts residential real estate.
In light of this, it is essential to mention a credit guarantee for MSMEs amounting to ₹9,000 crore. It will lead to higher economic growth and positive steps related to urban housing reforms and sustainable cities for future generations.
The announcements made and the vision documented in the Union budget 2023 has created great euphoria in the real estate industry. However, there still remains scope for improvement, for instance, on the rental housing front, which is a big market considering the large-scale migration due to economic considerations. Moreover, taxation on the income in the hands of unitholders of Real Estate Investment Trust (REITs) and Infrastructure Investment Trust (INVITs) might play a dampener in the coming times.
Frequently Asked Questions (FAQs)
Q1. What is the urban infrastructure development fund announced in the 2023 Budget?
Ans. Having a total capital outlay of ₹10,000 crore per annum, the NHB (National Housing Board) shall manage this fund. Different local and national public authorities can use proceeds from this fund to carry out urban infrastructure development in tier 2 and tier 3 cities.
Q2. Is there any proposal regarding capital gains concerning residential households in budget 2023?
Ans. Yes, Union budget 2023 has come up with a proposal to cap the capital gains tax exemption from proceeds of residential properties to ₹10 crore under sections 54 to 54F of the Income Tax Act of 1961.
Q3. What is the outlay for the Smart Cities Mission in budget 2023?
Ans. Smart cities mission with a revamped aim of creating sustainable cities of tomorrow has been allocated around ₹16,000 crore in the Union Budget 2023.
Q4. What is the exemption limit on TDS for cash withdrawal by cooperative societies?
Ans. In the Union budget 2023, the exemption limit for TDS (Tax Deducted at Source) for cash withdrawal stands at ₹3 crore for cooperative societies.
Ramya is a qualified lawyer with experience in both public policy and finance. She completed her B.A.LL.B (Hons.) from NALSAR University of Law, Hyderabad and is a registered advocate with the Bar Council of India. She is currently working in the Legal and Compliance department of Wint Wealth, and has previously worked closely with the Department of Economic Affairs, Ministry of Finance and ICICI Bank Ltd, Mumbai.