Budget 2022 Series - Real Estate and Renewables
Expectations around the budget are buzzing the media throughout the prior month. Expert advice has suggested many sectors that may benefit and many that may not reap fruits from the big day. Two such sectors expected to gain in the budget for 2022-23 are namely real estate and renewable energy.
Real estate
After a significant setback during the pandemic, the sector received growing opportunities from budget 2021. The latter half of 2021 saw a growth in the sector, especially in the residential part. Looking into the future, experts expect the following aid from the budget to help them sustain the post-pandemic growth.
1. Removing demand restrictions: The players expect lower interest rates on housing loans and an increase in the lending rate from banks for housing loans to 90% from 75-80%. They also hope the government allows second home purchases for the salaried class. An increase in the tax rebate amount from 2 lakhs to 5 lakhs is also expected to boost demand.
2. Affordable housing: In the previous budgets, affordable housing was based on the property size, pricing, and salary of an individual. This restricts pricing in many developed places. The sector expects the definition to be based on the loans a person can acquire (central bank's definition) to increase pricing, especially in developed cities. The tax holiday for interest payment up to 1.5 lakhs helped instill the demand last year. A further extension of the benefit is expected.
3. Supply-side boosts: Project approval procedures are expected to be made easier. The percentage of bank loans on land purchase is another awaited change. Public infrastructure projects are expected to be pushed forward and completed as soon as possible to revalue the assets in various regions.
Renewable Energy
The production and distribution of renewable energy and electric vehicles are attracting investment in the global markets. They also seem to satisfy the recent trend of ESG investments. The sector is growing fast and has seen substantial support from the government and investors in the previous year. To highlight the Rs.12k crore funding for green energy push and the vast investment from Ambani in electric vehicles and green energy in the later part of 2021 are some. In addition to the demand satisfying the demand criteria, green energy helps reduce the country's carbon footprints. The following expectations are at hand by investors to aid the sector's growth.
1. Tax redemption: The FICCI recommended that the government allow a 15% for companies investing in green technology and a total tax redemption for investment and purchase of green technology assets.
2. Credit guarantee: The chamber also recommended formulating a credit guarantee scheme, primarily to mitigate the risk from low credit rating customers to help them finance rooftop solar projects from banks. They believe that, though rooftop solar projects are widespread among industries, the residential part remains untapped and can contribute to almost 15% of the total rooftop solar capacity.