Amidst a global pandemic, the real estate sector has climbed up the ladder with large scale adoption of technology, bringing customer-centricity to the fore. The upcoming Union Budget 2022 is expected to prioritise the sector to help it realise its potential.
Without the slightest exaggeration, we can today safely say that the real estate sector is one of the strongest pillars of India's economic growth. It is the sector most closely resonating with the new and aspirational India. A consistent driver of the Indian economy, real estate has consistently withstood the test of time, making India come out victorious. No wonder we are the true architects in nation building and leave imprints for generations to come. The Union Budget 2022 would be the right opportunity to showcase how the sector has worked to overcome the COVID-19 pandemic.
The sector has led the country's economic revival through these tough times. It has been the most trusted, secure, stable and rewarding investment choice. It is now essaying a defining role by making India take a leadership position in the comity of nations. As we advance towards a future of growth and strong resilience, the focus now ought to be on exploring the uncharted paths, finding the underlying potentials, empowering stakeholders, establishing transparency and trust in the market- a hallmark of authentic leadership.
The Government's pro-business approach created a conducive environment, providing significant relief to the real estate companies. Visionary and supportive steps like Aatmanirbhar package, stamp duty cuts, large-scale infrastructure development, low tax regimes, and unchanged repo rate pulled the realty sector out of the blues relatively fast. Encouraged by the Government decisions, we expect the Union Budget 2022 to add further zest to the current growth momentum, taking the Indian economy past the $ 5 trillion landmark.
Recently, we saw how stamp duty cuts announced by various State governments encouraged homebuyers to accelerate their purchase decisions. Such encouragement is essential in a state like Haryana, which houses the bustling millennium city of Gurgaon. The city has acquired the status of a leading real estate market in the country, owing to factors like nearby international airport, large scale infrastructure development, excellent connectivity, and presence of Fortune 500 companies. Abundant greenery, modern amenities, and well-developed social infrastructure have made the city popular amongst homebuyers. The city's real estate sector is a key contributor to the state's economy.
Tier 2 cities also have helped keep the real estate sector afloat. During the peak of the first and second waves of the pandemic, it was majorly the Tier- 2 cities where transactions were happening as more people from metros wanted to shift to these cities. As the work and school from home setup continued, people started looking for spaces with larger layouts, dedicated office/schooling areas. They preferred such units over their spaces in metro cities. People wanted to be in their hometowns with their families in a modern setup, in a thinly populated neighbourhood. Metros with their high density, were becoming high infection zones. These issues helped in keeping the demand going for Tier- 2 cities.
Building on this, the Union Budget 2022 should liberalise the norms for Income Tax deductions under Section 80EEA further by allowing an increase in the Budget. The definition of affordable housing should be altered as per metro and non-metro city perspectives. This will encourage more people to finalise their home purchases and also give impetus to developers to move to Tier- 2 cities to cater to the renewed demand.
The trends shaped by the pandemic led to many positives in the realty sector. As compared to the first shock of the pandemic, the second half of 2021 was better managed and brought some encouraging results, which are continuing till now. The residential segment is now catering to millennial buyers or working professionals, who today not only look at homes as a living place but also as a guarantee to a secured future. To empower such homebuyers, Income Tax benefits should be extended to make realty investments easier for them. Furthermore, tax benefits on home loans under Section 80C (currently at Rs 1.5 lakh) can encourage sales and investments from prospective homebuyers. Moreover, more tax relaxations such as a hike in Rs 2 lakh rebate under Section 24 can also bring promising results.
Notably, the pandemic has turned the tide in favour of trusted developers who have brought transparency in the market and have made efforts to transform the market in becoming customer-centric. Announcements should be made to support such developers to better their profit margins and compensate for the time lost. We expect a single-window clearance mechanism and new provisions to boost rental housing, input tax and Goods and Services Tax (GST) credit for developers, among other things. Also, awarding the sector with an infrastructure status can help avail cheaper credit facilities from financial institutions and can help unlock vast opportunities.
With promising growth prospects, the real estate sector is expected to reach a market size of $1 trillion by 2030 and contribute 13 percent to the Gross Domestic Product (GDP) by 2025. Encouraging steps to develop an ecosystem of Research and Development (R&D), technology and innovation can take the sector to new heights.
We are now eagerly awaiting a forward-looking Union Budget 2022 with deep policy reforms for both commercial and the housing sector to make it more affordable and customer-friendly.