The Finance Minister’s fifth Union Budget on February 1, 2018, was probably one of the most closely-followed events for the Indian business community. Not only was it the final budget before the 2019 general elections, but strong rumours of a populist Budget were sending all sorts of mixed signals to various industries.
In any case, all sectors – and specifically real estate – had harboured considerable hopes from this Budget. Battered and bruised after demonetisation, RERA and GST, the sector looked forward to at least some major announcements that could re-inject the market into a growth trajectory.
Above all, real estate players fervently hoped for the long-awaited and long-elusive infrastructure status. The logistics sector and affordable housing had received it sometime back, but the market needs the benefits of infrastructure status on a much broader spectrum. Expectations notwithstanding, the real estate industry got neither infrastructure status or, for that matter, any additional direct policy push from Union Budget 2018-19.
Why is infrastructure status so important for any sector?
How can this status impact the country’s economy at large? What would have happened if infrastructure status had been granted to the real estate sector? (Refer to the infographic that highlights the positive implications.)
However, giving infrastructure to the real estate sector goes far beyond the above benefits. Given the government’s ambitious vision of ‘Housing for all by 2022’, it has a direct stake in helping the real estate industry get back on track. With rising demand and improving profitability, private players will be more than willing to be a part of the journey to achieve this ambitious mission. There would be increased real estate activity not only in the metros and larger cities but also in Tier-II and Tier-III cities.
Instead of providing the real estate sector infrastructure status, the Union Budget 2018-19 gave a minor boost to the Housing for All scheme with a stated intention to build 51 lakh homes in rural areas and 37 lakh urban houses. While this is commendable, it firstly hinges on actual implementation and secondly is an exceedingly slow and cautious approach where the Housing for all by 2022 scheme actually calls for a very aggressive slant.
Infrastructure status to the real estate sector would have been a major structural reform that could have boosted the GDP, increased employment opportunities, lowered the cost of home development and purchase, and led to rapid growth of the sector.
About the Author:
Santhosh Kumar is Vice Chairman at ANAROCK Property Consultants.