Waiting for Godot
Union Budget of 2021-22 presents several opportunities to give the real estate sector a shot in the arm. Given that real estate contributes more than 8 percent to the Indian economy, it has justifiable expectations.After all, the realty industry remains one of the most precise bellwethers of the state of India’s economy.
Multiple measures were announced by the Government in the year 2020 to beat the unprecedented impact of the COVID-19 pandemic on the overall economy and the real estate industryspecifically. These measures are commendable, but considering the depth of pain of the industry;are not enough.The housing industry needs focused measures to foster demand. This year, the real estate industry expects much more apart from single-window clearance and industry status.
Affordable housing is very likely to get another booster dose. However,the budget also needs to focus on the larger market as more than ever before,homebuyers and investors need focused tax incentives to get mobilized. Also, as the government is aware, developers’ liquidity woes need to be alleviated to forestall further market mayhem. The top one in the wish list is GST waiver for under-construction homes. Even a limited period waiver of GST will reduce overall property cost and thus push demand for under-construction homes, which have been slacking presently. The earlier one, alimited-period stamp duty cut in Maharashtra significantly boosted demand in both MMR and Pune. The most recent one has been reduction by 50 per cent in premiums charged on construction till December 31, 2021 by Maharashtra government is a welcome measure. The other expectation is hike the Rs 2 lakh tax rebate to at least Rs 5 on housing loan interest rates under Section 24 of the Income Tax Act lakh to generate healthier housing demand.
On the other hand the cost of input materials for real estateis on rise. Steel prices are set to go up further, despite the deep concern raised by the user industry.
Incidentally, hot rolled coil prices have increased 46 per cent to Rs 52,000 per tonne in November compared to Rs 37,400 per tonne in July last year. Rebar TMT, which are used in the housing and construction sectors, have touched Rs 50,000 a tonne.Amid rise in prices, Punjab industry asked Centre to ban export of steel for 6 months. Steel is one of the basic raw materials for the engineering industry. It is processed and after value addition, sold as finished products to automotive, tractor manufacturing, hand tool companies etc. It is an important component in the bicycle industry as well.
The cement industry has started recovering slowly from May 2020, given the pent-up demand and the improved rural demand.The industry overall is observing a production discipline. Prices in Maharashtra are up by around 10 per cent at Rs 354 a bag, supported by higher prices in the South, which is a key supplier to the states. The same for Gujarat remained steady up 3% YoY at Rs 350 a bag. As a result, prices in the West are currently up 1%(6% YoY) at Rs 352 a bag. The price rise is going to have a cascading effect on the cost of construction.
As the government looks to steer the pandemic-battered economy and push growth, the Finance Minister comes with a promise “never before” like Union Budget. That must deliver as per its promise else we will be waiting for Godot.
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