Union Budget 2024-2025

The Union Budget of 2024-25 marked the 50th day of the newly elected government. The finance minister was expected to not only help sustain the on-going economic growth momentum but also lay a strong foundation for growth over the 5-year tenure of its third term in the government. The Indian economy has been on a strong footing with three consecutive quarters witnessed growth exceeding all market expectations. The recently concluded FY2023-24 witnessed 8.2% growth, as against a revised expectation of ~7.6% by the government. Comfortable levels of inflation and fiscal debt scenarios provides an assurance that the growth momentum isn’t going to be challenged anytime soon.

Real estate has been immensely benefiting from this surging economic activity, with office, retail, industrial, warehousing and data centers, all witnessing healthy demand. Office sector has witnessed two consecutive years (2022-23) of 70+ MSF of gross lease volume and demand has been more broad-based with sectors such as Engineering & Manufacturing, BFSI, Healthcare etc. complementing the IT sector. Record number of launches and sale of residential units across top-8 cities have kept residential developers on their toes, as consumers have been increasingly transitioning towards projects with better amenities and lifestyle quotient. Alternative assets such as warehousing, industrial and data centers are growing fast and racing towards becoming more mainstream.

The real estate industry had high expectations from the budget in terms of removing potential roadblocks and creating a conducive environment for future growth. On the residential front, the industry was expecting the finance minister to announce measures to either increase disposal incomes or reduce tax burden over house ownerships. Commercial office sector was hoping for incentives towards Green building initiatives, clarity on SEZs, and assistance in creating an enabling framework for foreign companies to set-up operations here. Alternative segments such as warehousing, industrial and hospitality sectors had hopes of greater outlays for building infrastructure.

Walking on tight rope amidst industry expectations, the budget 2024-25 did managed to create some excitement amongst the real estate community in India. While there could be limited channels of direct benefits doled out to the sector, the indirect benefits have been strong. Enabling further growth of the manufacturing sector, massive skill development initiatives, attracting foreign companies through tax rebates, and incentivising job creation across domains are seen as immensely positive for the overall development of real estate. Introduction of a simplified long term capital gains (LTCG) tax and complete abolition of Angel tax could be construed as steps taken towards ease of doing business in India, thereby benefiting investors and start-ups. Budget has attempted to encourage ULBs to adopt digitization of land records and bylaws with time frame of 3 years and the move has potential to unlock major investment opportunities in the medium-term. On the flip side, there are a few misses when compared with industry expectations, but we believe the Union Budget FY2024-25 has enough firepower to sustain the on-going momentum in commercial real estate for the near-to-medium term.