In an exclusive conversation with Outlook Business, Nirav Dalal, Executive Vice President, Business Development and Chief Investment Officer, Shapoorji Pallonji Real Estate shares his thoughts on the Budget 2023, India’s outlook, the growth of demand in Tier 2 and Tier 3 cities, and more
The Union Budget 2023-24 has been presented by Finance Minister Nirmala Sitharaman and now, just days after the presentation, India Inc. has largely endorsed it. Apart from tweaks in income tax slabs and many other sweeping proposals, the announcements for the real-estate and housing sector too, have received a special applause.
From a whopping 66 per cent jump in the total outlay of PM Awas Yojana to the promotion of ‘Housing for All,’ the Budget 2023 has been nothing but a ‘package’ for the real estate sector. One such big player applauding is the Shapoorji Pallonji Group, also ruling the space for many decades now. Reacting to the Union Budget 2023, Nirav Dalal, Executive Vice President, Business Development and Chief Investment Officer, Shapoorji Pallonji Real Estate, in an exclusive conversation with Outlook Business shares his thoughts on the Budget 2023, India’s outlook, the growth of demand in tier 2 and tier 3 cities and more.
The real estate sector has largely given a thumbs up to the Union Budget 2023-24. It’s being called a budget for everyone despite a global economic slowdown. So, what does the way forward look like?
In the Budget 2023, there is a lot of boost in terms of infrastructure and urbanisation of Tier 2 and Tier 3 cities. In fact, tourism is also being taken ahead with 50 new airports in Tier 2 cities along with some 100 railway stations. So, all these steps direct towards development of areas which had been lagging for a long time. Now, this will lead to an overall growth in India, expansion of all kinds of real estate and even metros from Tier 1 cities to now in Tier 2 and 3. So, I think that all this is rare and new, and that’s what the direction is.
In one of your post Budget statements, you said that the increase in income tax exemption limit will encourage homebuyers to invest more. With rationalisation of tax regime, how do you see the demand trends changing in short term?
Generally, we have seen the income tax slabs improving. But this time, there is a quantum jump of minimum exemption slab, from Rs 5 lakh to Rs 7 lakh. Now, this revision in the rate will put a larger amount of disposable income in the hands of the middle population. Since housing is a foremost need for first-time home buyers, I think that, if not in the immediate short term, in the long term, will reap benefits. I also think that gradually, people will look at buying homes as this exemption limit will also take about a year’s time to get the full game in the hands of people. So, not in short term but in the medium and long term, it will actually help to increase the disposable income.
Coming to the Affordable Housing Fund - the industry is very happy with an increase in 66 per cent allocation. How do you see companies like yours benefitting from this?
I think that this 66 per cent increase in total outlay, which goes up to some Rs 79,000 crores is a big jump, one that will push ‘housing for all’ further. As far as Shapoorji Pallonji is concerned, we have a big housing segment which is spread across five to six cities in India. So, I believe that this along with infrastructure development in Tier 2 and Tier 3 cities, will also further fuel the demand for ‘housing for all.’ We are hopeful for a rise in demand for housing, especially in the mid-housing segment because if this demand rises, we may look at expanding to other Tier 2 and Tier 3 cities as well.
There has been a long pending demand of sector players for industry status. But even this Budget did not entertain your demand. What do you have to say on this?
The demand for industry status has been there for almost 5-10 years now but as you know it too, it has not come up. I believe that the status will help in mainly adding to the bottom line of the developers and thereby, boosting the industry. But since it is not there, we have to just live with it. In future, if it comes up, it will be good as both infrastructure and housing are important. And when they go parallel, the development of infrastructure definitely helps housing but in a different way. So, I hope that the people in power consider this in the years to come.
How is Shapoorji Pallonji planning to utilise the benefits of the announcements made in the Budget 2023-24?
There will be a continued focus on housing, mid-housing segments and even on the expansion of our platform for this. In this Budget too, this focus on tourism is expected to create a demand in the destinations around tourist cities which also includes Tier 3 cities in India. Therefore, more destinations for mid-housing segments are expected to come up and we also have our own land in the outskirts of Mumbai, Pune, and even in some Tier 2 cities. Over a long term period, tourism is expected to help housing sector to some extent in this way – once tourism boosts, it will add to the income; this will attract people and investments in and around tourist areas, and therefore, the demand for second homes, especially in tourist destinations is expected to go up.
The Budget has allocated Urban Infrastructure Development Fund for Tier 2 and Tier 3 cities. How does Shapoorji Pallonji aim to capitilase on it?
Initially, the development of mid housing or affordable housing in Tier 2 and Tier 3 cities didn’t pick up because the infrastructure was not available beyond the metros. So, as soon as infrastructure comes up in these areas, it can make the population shift to these areas from metros. And that’s how the demand for housing may move up, from the congested metros towards the Tier 2 and Tier 3 cities. So infrastructure development, per se, which goes beyond the metros to the other cities, will take the development and demand of housing towards the cities. Hence, with this Budget 2023, there is another opportunity for the developers to gradually look at the demand which will arise in these areas.
Is there something that the Budget 2023 could have addressed for the real estate sector but it didn’t?
As we already spoke, the industry status to the sector could have been one thing. Second, if the sector gets the ‘single window clearance on approvals’ that would definitely help. Another thing, you know, the second homes or the non-self occupied homes are still taxable. So, from the broader perspective of the real estate sector, if other tax concessions on second homes would have been there, that would’ve also boosted investment in the real estate sector.