Affordable housing is a big boost for the real estate finance sector

The Indian real estate sector has witnessed a significant boom in recent quarters, driven by factors such as rapid urbanization, policy reforms, rising disposable income and a continuous rise in consumer sentiment. The sector has witnessed remarkable progress over the past year, strengthening its position among various other sectors.

And indeed, the Finance Minister has given a big boost to this segment in the Budget by allocating a whopping ₹10 lakh crore for both rural and urban areas under the Pradhan Mantri Awas Yojna credit-linked subsidy scheme. This also sends a strong signal of continued focus and emphasis on driving growth in affordable housing in the country, in line with the federal government’s stated intention of ‘Housing for All’. I see a sharp increase in the affordable housing sector on the back of this announcement, which will also boost the cement and steel sectors and create additional employment.

Long-term effects

Another positive development for the real estate sector was the announcement of a lower duty for women buyers. This is an initiative aimed at increasing women’s home ownership and financial security, which is likely to drive growth in the number of first-time home buyers. In the long run, it is likely to diversify ownership, provide women with financial independence and reduce the age of first-time home buyers.

The digitalization of land records — in both urban and rural areas — is a welcome development and will improve transparency, increase revenue compliance and improve the overall flow of credit. This in turn will have a positive impact on housing demand in the long term.

Priorities: Jobs and SMEs

This budget is very focused, addressing two major priorities of the economy: employment generation and micro, small and medium enterprises (MSMEs). The move to provide funds for first-time workers, with proportionate benefits for companies, will provide an incentive to hire more people.

The interests of the SME sector have been addressed through the Credit Guarantee Scheme and the push for more bank lending. This will also generate additional employment and have a cascading effect on consumption. There are lending opportunities for SMEs, in addition to housing. At the micro level, educational loans will also lead to an increase in demand.

All these measures will provide a boost to infrastructure-related industries such as cement, steel and machinery, while the real estate sector will see a revival in affordable housing.

Reducing the fiscal deficit

The fiscal deficit has been estimated at 4.9%, down from 5.1% in the interim budget, and the finance minister and her team have been praised for keeping it at that level. Moreover, the size of the budget has increased only marginally, by about ₹50,000 crore. This will keep the government’s borrowing plan largely neutral.

Overall, this is a good budget for the housing sector, with a number of positive changes that will provide impetus for the sector’s continued growth trajectory.

(The author is Managing Director, Sundaram Home Finance)