There are great expectations from Budget 2020 to fuel consumption, increase demand in the market and aid the economy on its way to recovery, given that the initial dust arising out of reforms has settled down.The Union Budget is expected to continue with the government’s focus on infrastructure development leading to job creation and national development, especially in light of the recently launched National Infrastructure Plan (NIP). A stronger focus on the implementation of stress funds with an aim to promote new investments is expected.
There are certain financial, infrastructure and real estate measures that can be looked at for stoking demand in the market and increasing capital flows. A stable policy direction in personal taxation and reforms in land and labour, easier options for money lending and cheaper Financial Institution (FI) borrowing, lowering and clubbing of GST slabs in certain cases, unburdening of basic raw materials like steel, cement; reduction in import duty on coal, sand, and power generation through renewable resources is expected.
From our perspective, it is essential that there is a sustained focus on creating both end-user and investor demand. On the overall financial front, there is an expectation to create a conducive environment for the rapid development of bond markets and creating a securitization market to free up capital.
In an emerging market like India, the government can look at contractual savings scheme for housing, mortgage securities in emerging market and housing provident funds as alternative instruments of finance for reviving the real estate sector. A quicker on-ground implementation of NIP too, will have a cascading impact on its revival.
The Budget is expected to provide further impetus and funds to the Smart City vision of the prime minister. There may be announcements of more metro rail projects in Tier II and Tier III cities. A greater push on PPP projects under the Hybrid Annuity Model seems likely that will create safe investment options in the infrastructure space. There is a possibility that the government may declare a large outlay for river linking (Sagarmala) projects and try to balance out the floods by nationwide water levelling. Given the focus on ‘Bharatmala’, ‘Sagarmala’ and freight corridors, there are expected to be incentives around warehousing to help ease the crisis of seasonal food prices in addition to industrial warehousing.
We do expect large scale reforms in the education sector and creation of effective regulatory bodies to regulate the current education system. In the process, leading to the announcement o of more IITs, AIIMS and IIMs. The government must focus on measures which will lead to employment generation and higher consumption, through competency-based approach.
To help employment generation, focus needs to be on competency-led skill development. While initiatives like National Skill Development Mission and Pradhan Mantri Kaushal Vikas Yojana are showing results, we believe that the government should concentrate on creating a holistic framework which includes education reforms and a ‘farm to future’ agenda. Additionally, programmes which envision development of an individual linking vocational skill to apprenticeship and professional qualification should be emphasised. The development and recognition of professional skills will prove to be attractive for people in the sector.
The RERA needs to be strengthened and towards that end, RICS is helping put together a process manual on how this digital platform will work, taking into account the principles of earned value management, to ensure projects are being developed as per schedule.
While commercial housing is on an upswing, rental housing is a very important aspect that should have renewed focus and policy measures to boost residential real estate. It is advisable to provide dwellings for the poor/homeless/migrants with rental rates between Rs 2000 and Rs 2,500 per month, student population which is still not independent with rentals of Rs 5,000–6,000 per month and white-collar employees (LIG/MIG) between Rs 20,000 and Rs 25,000 per month. This should lay the ground for creating a critical mass for Residential REITS in the business.
(The writer is MD, RICS South Asia)
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Updated Date: Jan 30, 2020 22:08:19 IST