Budget 2023-24 nonchalant for real estate, how would it affect housing prices

HYDERABAD: The Union Budget 2023-24, which was presented by Finance Minister Nirmala Sitharaman on February 1, focused on tax reduction, employment generation and infrastructure building. However, there were no announcements which would directly boost the housing sector. Taxpayers did not see a benefit under any section, including the previous home loan tax benefits.

The real estate industry saw a steep fall in demand during the COVID 19 waves. However, soon after the lockdown was evoked, the demand for houses rose up in 2022, with the government reducing the interest rates on home loans.

“This boost in housing demand is possibly because of pent up demand and measures taken by the government to increase affordability. The number of unsold residential units have also witnessed significant drops during the second wave of the pandemic,” the Economic survey 2022 said.

In the last quarter, the housing prices sky-rocketed due to an increased cost of constructing houses. The Russia-Ukraine war also impacted the cost of construction as the cost of procuring key materials like steel, lime and cement had increased.

According to the Economic Survey, "Going forward, the recent government measures, such as the reduction in import duties on steel products, iron ore, and steel intermediaries, will cool off the construction cost and help to check the rise in housing prices.” However, due to no cemented announcement on the import costs, it was not seen whether the housing prices would go down.

“An overwhelming 58 per cent of the developers feel that housing prices are likely to rise in 2023 amidst volatile input costs, economic uncertainties and sustained inflation rates,” said a 'Real Estate Developers Sentiment Survey', by Realtors apex body CREDAI, real estate consultant Colliers India and property research firm Liases Foras.

Anuj Puri, Chairman of ANAROCK Group, one of India’s leading players in the real estate chain, said, “The enhanced allocation for PM Awaas Yojana by 66% to over INR 79,000 crores is certainly a boost for affordable housing, which was flagging due to increased input costs and also because the buyers in this segment, mostly from the unorganised sector, were still reeling under the impact of the pandemic. It is another step towards the government's Housing for All mission.”

“As anticipated, the FM also tried to rejuvenate the MSMEs sector which has a multiplier impact on the growth of the overall economy. The revamped credit guarantee for MSMEs and special tax benefits and deductions will provide impetus to overall industrial development, and this can have a rub-off effect on the real estate sector since the pandemic slowed down demand for affordable housing in 2021 and 2022.”

“Resultantly, new supply in this segment also reduced. As per ANAROCK Research, 2022 saw a trend reversal with the share of new supply in the affordable housing category