7 Key Takeaways for the Real Estate Sector From Union Budget 2023

India’s finance minister, Mrs Nirmala Sitharaman presented the much-awaited Union Budget 2023 in the Parliament on 1st February 2023. Amidst the global economic uncertainty, India continues to be a strong performer. The GDP growth is expected to remain strong at 7% in FY 23 and will remain above 6% in FY 24 as well. 

The Finance Minister made several announcements that will be directly or indirectly related to the real estate and infrastructure industry. The measures to encourage affordable housing and ease of doing business may well prove to be a welcome move. 

Below are some key highlights for the real estate industry from the union budget 2023.

1. Increase in Outlay for PMAY

The Government announced 79,000 crores for PM Awas Yojana, this is a 66% increase compared to the previous year. The increase in funding showcases the government’s

commitment to promoting affordable housing in the country.

2. Revision in Calculating Capital Gain in Joint Property

The Finance Minister also proposed to change the rules for computing capital gains in case of joint property development to include the money paid by cheque or any other form of payment.

3. Exemption to Development Authorities

An exemption will be provided for any income arising from a body or authority or trust or commission, that has been established or constituted under a State or Central Act with the purpose of satisfying the need for housing, development or improvement of cities, towns and villages for regulating any activity, irrespective of whether it is carrying out commercial activity.

4. Urban Infrastructure Development Fund

The Finance Minister emphasised developing and urban planning in tier 2 and 3 cities. National Housing Bank (NHB) will manage this Urban Infrastructure Development Fund (UIDF). An outlay of 10,000 crores has been proposed for this initiative. The Government will also set up 5 centres of excellence for urban planning. A core committee of economists and urban planners will be set up to recommend and execute urban planning policies, resource building and governance.

5. Creating Sustainable Cities of Tomorrow

For creating the sustainable cities of tomorrow, the states and cities should undertake urban planning reforms and actions. This means efficient usage of land resources, transit-oriented development and increased availability and affordability of urban land for all.

6. Making Cities Ready for Municipal Bonds

Cities will be noticed to increase their creditworthiness for municipal bonds by ring-fencing user charges on urban infrastructure and implementing property tax governance reforms.

7.  Capping in Deduction of Capital Gains

For better targeting of tax exemptions, the capital gains on investment in residential housing under Sections 54 and 54F were capped at Rs 10 crore. The Finance Minister also proposed to change the rules for computing capital gains in case of joint property development to include the money paid by cheque or any other form of payment.