Akash Pharande, Managing Director - Pharande Spaces, says we asked for democratic GST as well. But…
As the stock markets turn somersaults and throw people's investment portfolios into complete disarray, one asset class continues to be reliable and predictable. Real estate, especially residential real estate, remains the steadiest investment. This is why the performance of India's housing market remains the most reliable barometer of the country's economy.
One may ask how one can state this so confidently. After all, capital appreciation on residential property does not exceed 5% in most cases. But the real value of housing does not lie just in ROI - Indians have so much confidence in housing as the ideal investment because ownership homes are the basis of all other financial security and prosperity.
This is why Indians buy homes as soon as they're able to. Neither gold nor the stock markets hold as much attraction for Indian investors as residential real estate.
The government is well aware of this fact. This is why investment in housing attracts the most tax benefits, and why housing was such an integral part of the government's election manifesto. Even if it still seems like a distant possibility, 'Housing for All' is nevertheless a promise which speaks directly to the heart of every Indian.
Also, no other asset class can help the government raise funds for its various schemes as much as housing can. Revenue from stamp duty and registration charges contribute significantly to government coffers. While the Covid-19 pandemic was at its worst, demand for housing increased while every other investment class was battered and bruised. Owning a home has always conveyed a sense of security in India - and even more so in such times of upheaval and uncertainty.
Through ups and downs, real estate is the mainstay driver of the Indian economy. It is therefore surprising that Union Budget 2022 did not give more impetus to the housing sector. Despite the limitations of the ongoing economic situation, the government is empowered to support this vital industry.
The demands were simple and logical:
1. Provide more tax breaks and concessions to incentivize homebuyers
2. Give industry status to the entire housing sector so that developers can access cheaper funding and help the government reach its Housing for All goal
3. Release some of the huge land parcels controlled by various government agencies so that more housing can be created in urban areas, where it is needed the most
4. Apply the principles of democracy and equality to how GST is charged on housing, so that people find it feasible to purchase cheaper under-construction homes and not only gravitate towards the more costly ready-to-move options.
Another urgent requirement from Budget 2022 was to widen the price and size definitions of affordable housing, which provides the most benefits to buyers. Going by various reports from different consultancies, it is quite clear that most of the demand right now is for bigger homes. Work-from-home and study-from-home are not just upper-middle-class realities, and they require bigger homes.
As per our observations, 2, 2.5, and 3 BHK homes are currently the biggest sellers. Despite the many remaining uncertainties, homebuyers are willing to invest in larger homes. Indians are no longer looking for starter homes - they want final homes.
Unfortunately, we are now also at a point when both property prices and home loan interest rates will start going up. Housing affordability is being challenged at a time when demand is at an all-time high. Budget 2022 was an ideal opportunity to foster this demand with additional incentives. While it did extend benefits being given to affordable housing and also focused more on infrastructure, Indian middle-class homebuyers found nothing to cheer for.
About the Author
Akash Pharande is Managing Director - Pharande Spaces, a leading real estate construction and development firm famous for its township properties in West Pune. Pharande Promoters & Builders, the flagship company of Pharande Spaces and an ISO 9001-2000 certified company, is a pioneer of townships in West Pune.