Budget 2024 ammo for India to win real estate battle over injured China – The Economic Times

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Budget expectations: There can’t be a more apt time for India’s budget to show how to ‘strike while the iron is hot’ as its larger neighbour and fierce rival China’s economy goes through testing times amid a property crisis. While China is suffering an economic plight largely with the failure of its biggest real estate developers that shows no sign of abatement in the downward spiral, India, which has emerged as the fastest growing major economy, is seeing adding many feathers even on the property sector ducking global woes.
India is chasing ambitions to be the third largest economy by 2030 while it ramps up infrastructure and invests trillions. India is adamant to be a global manufacturing hub, replacing China as the world’s factory floor to a great extent, and is also becoming a cradle of global tech and R&D. These would all lead to jobs growth and income boost – paving way for office and housing property demand. Moreover, a strong consumption base has already set the tone for rapid development in retail and warehousing segments.Also Read: Budget may lay red carpet for the world to shift supply chain from China

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Ashish Deora, the founder and CEO and founder of Aurum Ventures, which owns D-Street-listed Aurum PropTech, told ET Online that five key demand segments from Budget include increased urbanisation, growth in the IT and BFSI sectors, the proliferation of manufacturing corridors, the exponentially growing digital economy and rapid infrastructure development.
“Bharat led the global fintech revolution, and we are confident that we will become global leaders in the sector by building transparency and trust with technology in the real estate sector,” he added.

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Big role of Budget for building property market

The interim budget thus has a big role to play to add more ammunition to the property market and further strengthen the cheer of the Bharat Moment. From tax rebate rejig to affordable house pricing adjustments, stakeholders expect a slew of budget measures for ensuring the industry rides the Bharat moment momentum.

“In navigating towards the $1 trillion revenue goal by 2030 and aiming for a 13% GDP contribution by 2025, India’s real estate sector stands pivotal, demanding a nuanced approach
in the upcoming budget,” Vikas Wadhawan, Group CFO at Housing.com, told ET Online.

“Budget encouraging sustainability and innovation within real estate projects will align with global trends and appeal to conscientious investors, shaping a resilient future for the industry and aligning with long-term growth objectives,” he added.

China crisis an opportunity to cheer for India

China’s property crisis is in tandem with the rise and struggles of China Evergrande and Country Garden, two of the largest developers in China, which amassed a collective debt burden of around $500 billion and are under severe stress now.

Once a giant, Evergrande Property Services on Monday halted trading in Hong Kong after a winding-up order.

Leading China property companies, including Gemdale Corp. and China Vanke Co. Ltd., which were earlier resilient amidst challenges, are now facing significant pressure due to substantial maturing debts. This situation has unsettled investors, leading to a drastic drop in the value of the latter’s dollar bonds.

“Amidst China’s stagnant realty market and slower economic growth, investors are increasingly focusing on emerging markets, with India standing prominently at the forefront. In contrast to China’s cooling phase and increasing uncertainties, India’s stable and reform-oriented approach is likely to make it an attractive destination for investors and a key driver of global economic growth,” Wadhawan said.

India’s Strengths

According to Statista, the real estate market in India in 2017 was valued at approximately $120 billion and it is estimated to soar to a whopping $1 trillion by 2030.

In recent years, there has been a notable surge in foreign investments in India. This increase coincides with significant industry changes, marked by substantial structural and policy reforms aimed at enhancing transparency and simplifying business operations.

India’s consistent performance as a high-growth emerging economy sets it apart, attracting investors seeking stability and promising returns amidst the shifting dynamics of the global economy, particularly within the real estate sector, Wadhawan said.

The structural and policy reforms that enhanced transparency and ease of doing business in the property sector also helped India’s real estate industry triple foreign institutional inflows to $26.6 billion between 2017 and 2022, Colliers had reported last May.

“Demonstrating confidence in the visionary, stable, and progressive leadership of Bharat, FIIs have significantly increased their appetite. Global funds are eager to tap into supply-side stakeholders who can acquire, build, and monetize on a large scale, Deora said.

APAC’s commercial real estate sector faced a downturn in Q3 2023. Deal volumes plummeted by 37% to $25.7 billion, the lowest since 2010, as per MSCI Asia Pacific Capital Trends report. Amidst regional decline, India saw a 44% surge to $1.5 billion, mainly propelled by Brookfield’s $683 million sale of a 50% office portfolio stake in Mumbai to Singapore’s GIC.

Global and Asia-Pacific investors find the current Indian property market appealing due to its attractive pricing, improved valuations and higher yields.

Housing sales in value and volume hit record high across seven major cities in India in fiscal 2023 and housing sales were seen to break three-year record this festive season. Amid growing wealth of Indians, ultra-luxury homes hit record high sales in 2023. Home buying affordability will also get better in 2024, according to a report by JLL India on the Home Purchase Affordability Index (HPAI). This expectation is based on the projected repo rate cut of 60-80 basis points throughout the year.

India is seen to be at the brink of its second phase of increased capital expenditure (capex). There’s also a significant surge in housing activity in the country. Even looking at the markets as an indicator, the Nifty Realty Index has surged by 65% in the last year, surpassing 13% gain in the Nifty 50 index.

Fitch expects urban housing activity to continue to recover in 2024 from multi-year lows, despite moderation from 2022-2023 levels.

India’s consistent performance as a high-growth emerging economy sets it apart, attracting investors seeking stability and promising returns amidst the shifting dynamics of the global economy, particularly within the real estate sector, the CFO of Housing.com, PropTiger.com and Makaan.com said.

What can the budget do for the real estate boom?

Every year, the real estate sector offers the Finance Ministry an ambitious wishlist ahead of the annual Union Budget. Requests for industry status for housing and streamlined clearance processes for housing projects are consistent demands and it persists this year as well, when the results of the upcoming Lok Sabha elections will also have a significant impact on the demand for and growth in residential real estate.

“Beyond emphasising affordable housing, it’s crucial to acknowledge the industry’s complexity by granting it Industry status, facilitating easier credit access, incentivising innovation, and implementing a streamlined single-window clearance system. Simplifying approval processes will significantly cut project timelines and costs, fostering investments and bolstering overall demand,” said Housing.com’s Wadhawan.

Also Read: India’s housing market at all-time high in 2023, growth pace likely to sustain in 2024

The official says the real estate sector proposes several key reforms for the Union Budget, aiming to alleviate financial strain on homebuyers by increasing the home loan interest rate tax rebate from Rs 2 lakh to Rs 5 lakh.

To stimulate affordable housing, revival of expired benefits and tax breaks for developers is suggested, coupled with incentives to enhance accessibility to affordable homes. Additionally, NAREDCO’s appeal for a Rs 50,000 crore fund aims to bolster the industry and improve housing availability. Incorporating GST input tax credits for developers, rental housing incentives, and adjusting affordable housing pricing structures could collectively foster real estate growth, promote affordability, and contribute significantly to achieving “housing for all”, Wadhawan said.

ANAROCK also said raising the tax rebate on home loan interest rates from Rs 2 lakh to a minimum of Rs 5 lakh under Section 24 of the Income Tax Act is crucial. This adjustment could significantly invigorate the housing market, especially in the affordable housing sector, which has experienced reduced demand amid the pandemic, said Anuj Puri, Chairman – ANAROCK Group.

Also Read: Budget 2024: Govt may go for big hike in PM-Kisan payout and a housing and jobs push

They also vouch for the importance of affordable housing and budget measures for the same.

Revising the eligibility criteria for affordable housing is imperative to facilitate greater benefits. Presently, the criteria set by different authorities present discrepancies, causing disparities in housing accessibility. By recalibrating the budget ceiling to Rs 85 lakh for major cities and addressing land scarcity through the release of government-owned land, particularly by entities like Indian Railways and Port Trusts, we can not only enhance housing accessibility but also potentially mitigate the soaring real estate prices prevalent in urban areas, Puri said.

This recalibration aligns with the aim of fostering greater homeownership and affordability, enabling more individuals to benefit from governmental aids and reduced GST rates, ultimately promoting a more inclusive housing landscape.

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