Butterfly Effect. Domino Effect. Gestalt Effect.
All of these signify impacts that exponentially amplify the cause.
The first Union Budget under Modi 3.0 is a fiscal tour de force that builds an impregnable plinth for India’s development roadmap towards a Viksit future.
Often, flashbacks make for some of the most inspiring stories. Budget FY2025 is a compelling moment for one such story.
The Plot Builds
Not long ago, the return of a coalition government post-elections raised the spectre of a populist mindset. A blockbuster ₹2.11 lakh crore dividend by the RBI to the incoming government only raised the probability.
An improved fiscal deficit at 5.63 per cent of the GDP in the run-up to Budget FY2025 highlighted the immaculate ability of the government to steer a tight ship, delivering growth amid prudence, in an ever-volatile world.
Meanwhile, the emergence of whispers about economic growth sans jobs would have only complicated matters for the government in choosing its preferred path of continued growth.
Fast forward to the Economic Survey FY2024 — the 476-page document highlighted the case for the trinity of the government, the private sector, and the citizenry to fire on all cylinders to escape economic inertia.
The D-Day Highlights
In her record seventh Budget, Finance Minister Sitharaman laid out the priorities upfront. As the sectoral announcements followed, the macroeconomic context within which these reforms are being implemented is game-changing.
The GDP growth for the fiscal year 2024-25 is projected at 6.5 per cent. Inflation is expected to remain within the targeted range of 2-6 per cent and the fiscal deficit is targeted at 4.5 per cent of GDP, with plans to gradually reduce it over the next few years.
Real Estate is the Catalyst
The reforms present a pivotal moment for the real estate sector. Substantial financial commitments under the ₹11.1 lakh crore capex outlay are set to recalibrate the sector, transforming it into a catalyst for holistic national development.
Under the PMAY-U initiative, the allocation of ₹10 lakh crore to address housing needs for 1 crore families is a transformative step. Additionally, the allocation for completing 3 crore houses in rural and urban areas underscores the government’s commitment to improving the ‘Ease of Living’ and ensuring dignity for millions of Indians.
The substantial capital expenditure of ₹11.11 lakh crore (3.4 per cent of GDP) on infrastructure will propel growth and enhance nationwide connectivity. The proposed relaxation of FDI rules further positions India as an attractive destination for global investments.
Of particular note is the government’s collaboration with states to reduce stamp duties, especially benefiting women — a move that not only reduces acquisition costs but also empowers women, honouring their economic role as the backbone of our society.
The Credit Guarantee schemes unveiled today for MSMEs in manufacturing, featuring a new assessment model and a substantial guarantee cover of ₹100 crore, underscore their critical role as engines of national growth. This initiative not only promises to generate employment but also aligns with Hon. Prime Minister Narendra Modi’s ‘Make in India’ vision, reinforcing India’s stature as a preferred manufacturing hub on the global stage.
The reduction in Long Term Capital Gains Tax (LTCG) on the sale of property from 20 per cent to 12.5 per cent is a significant reform aimed at making real estate transactions more attractive. This measure is expected to boost investment in the real estate sector by reducing the tax burden on investors. Additionally, the removal of indexation for calculating long-term capital gains simplifies the tax computation process, providing clarity and ease for taxpayers.
A substantial allocation of ₹2.2 lakh crore for urban housing over the next five years marks increased funding that will accelerate urban housing projects, improve urban infrastructure and enhance living conditions in cities.
By enhancing urban infrastructure, these projects will contribute to creating liveable, sustainable cities.
Addressing the housing needs of industrial workers is another innovative aspect of the Budget. The proposal for rental housing with dorm-like accommodations in a Public-Private Partnership (PPP) mode is expected to promote industrial growth and stability in labour-intensive sectors.
The Budget outlines a total expenditure of ₹45.03 lakh crore, with significant allocations to infrastructure, education, and healthcare.
By ensuring that industrial workers have access to decent living conditions near their workplaces, the government is fostering a stable and productive industrial workforce, which is essential for sustained economic growth.
By integrating residential, commercial, and recreational spaces with efficient public transport systems, TOD initiatives aim to reduce congestion, lower carbon emissions, and improve the quality of urban life.
These projects exemplify sustainable urban development, aligning with global best practices and supporting the broader goal of creating smart, resilient cities.
The Budget’s proposal to develop investment-ready ‘plug and play’ industrial parks in or near 100 cities is expected to attract significant industrial investments. This initiative supports the growth of ancillary services and residential developments in these regions, contributing to balanced urban-rural growth.
The Budget’s provision of ₹1.5 lakh crore in long-term interest-free loans to states for infrastructure development is poised to enhance connectivity and amenities across regions. This financial support will positively affect real estate markets by making regions more attractive for residential and commercial investments.
Digitization initiatives, including the establishment of a unified online platform for property registration and related services, are set to revolutionize the real estate sector. These measures aim to streamline property transactions, improve transparency, and reduce bureaucratic delays.
While these initiatives are commendable, enhancing direct financial benefits to the common people could further amplify the positive sentiment and boost consumer confidence, especially given India’s current economic trajectory. We believe this would significantly improve the feel-good factor among the common people and contribute to broader economic prosperity.
In conclusion, we commend the Hon. Finance Minister for presenting a forward-looking Budget that addresses critical national priorities. The focus on accelerating infrastructure development and urban expansion aligns perfectly with the evolving needs of our growing population.
By Boman Irani, MD & Chairman of Rustomjee Group
