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What’s in This Year’s Budget Presentation For Real Estate Investors

The recently unveiled Union Budget for 2023–24 may mark a turning point for the real estate sector. The Finance Minister claimed that the government had developed a number of measures that would enhance the country’s real estate and infrastructure. For these sectors, FM has issued the following announcements.

1. The PM Awas Yojana budget was boosted by FM by 66%, taking it to approximately ‘79,000 crore.
2. A 10 crore limit was also suggested by FM for the section 54 and section 54F deductions from capital gains on investments in Apartments In Karapakkam lowering the amount of income tax exemption available for premiums from excessively expensive insurance policies.
3. FM also advised expanding the definition of “capital gains” to include funds received in the form of a check or other form of payment for calculating capital gains in joint property development scenarios.
4. Union Finance Minister Nirmala Sitharama added that while interest paid on borrowed capital for purchasing or improving real estate may, under certain circumstances, be deducted from income, it may also be included in the cost of purchase or improvement at the time of transfer, lowering capital gains. It is recommended that the amount of interest previously claimed as a deduction not be included in the cost of acquisition or renovation.
5. FM also suggested amending the rules to incorporate the money received by check or another form of payment as consideration when computing capital gains in circumstances of joint property development.
6. By implementing property tax governance changes and ring-fencing user fees on urban infrastructure, cities will be encouraged to improve their creditworthiness for municipal bonds.
7. FM stated that, similar to the RIDF, an Urban Infrastructure Development Fund (UIDF) will be created using the gap in loans to the prioritized sectors. Public agencies will use this to build urban infrastructure in Tier 2 and Tier 3 cities, and the National Housing Bank will oversee it. States will be urged to use funding from the 15th Finance Commission’s grants and other programs to implement reasonable user fees while accessing the UIDF. We anticipate providing 10,000 crores annually for this purpose.
8. The newly created Infrastructure Financing Secretariat will work with all stakeholders to increase private investment in Flats In Karabakkam, especially in areas heavily reliant on public resources like trains, roads, urban infrastructure, and power.
9. States and towns will be pushed to make urban planning changes and take other initiatives to make their cities “sustainable cities of tomorrow.” According to FM, this entails the effective use of land resources, sufficient funding for urban infrastructure, transit-oriented development, increased access to and affordability of urban land, as well as possibilities for all.
10. It is proposed to exempt from taxation any income earned by a body, authority, board, trust, or commission that was established or constituted by or pursuant to a central or state act for the purpose of addressing the housing shortage, planning for the development or improvement of cities, towns, or villages, or regulating any activity or matter, regardless of whether it engages in commercial activity.

The Advantages And Disadvantages

The real estate sector believed that a number of measures would be incorporated into the Union Bill for the fiscal year 2023–24 when it was introduced by Finance Minister Nirmala Sitharaman.

Nonetheless, the developer community has been miffed by the disappearance of numerous important proposals made by developers in the previous month. For instance, the infrastructure status that the real estate industry was expecting has not materialized. A persistent request for a single-window approval procedure was likewise disregarded by the minister.

However, the financial measure did not include the tax reduction that the industry had been expecting.

Favorable Actions Are Announced

The actions listed below, notwithstanding a few omissions, are anticipated to help real estate developers, who have been under a lot of strain since COVID’s entrance.

Financial Stimulants 

For the financial years 2023–2024, the finance minister predicts a 7% rise in the economy. With a budgeted capital expenditure of Rs 10 lakh crore, a YoY increase of 33%, more development will be observed around the country and attract more investors. The market’s cash liquidity would increase as a result, helping the real estate industry.

Tier 2 and Tier 3 Cities Place A High Priority On Urban Planning

Urban planning is highly valued in Tier 2 and Tier 3 cities.

In this year’s budget, the Finance Minister placed special emphasis on urban planning and development in Tier 2 and Tier 3 cities like Apartments in Karapakkam. Housing could benefit from an emphasis on sustainable and planned development.

The proposed Urban Infrastructure Development Fund will be under the supervision of the National Housing Bank (UIDF). Public organizations will be able to build infrastructure in Tier 2 and Tier 3 cities because of this. For this fund, a budget of Rs 10,000 crore has been suggested.  Five centres of excellence for urban planning have also been suggested, giving the industry access to a pool of qualified candidates. A high-level group of urban planners, economists, and other experts was established to recommend urban planning policies, implementation plans, capacity building, and governance, and organizations will emerge.