Fiscal stability takes the centre stage in India’s growth strategy

India’s Union Budget for FY27 has laid much thrust and emphasis on infrastructure development and fiscal discipline. Although there are no fresh fiscal incentives or tax sops, in particular for real estate sector’s affordable housing, it is expected that record capital expenditure will support construction activity.

At the outset, the focus on regional development through creation of city economic regions (CERs) with allocation of Rs5,000 crore per CER over 5 years via a challenge mode financing mechanism will boost housing and commercial space demand in tier II and III.

The bio pharma Shakti outlays involving Rs10,000 crore over the next five years, will drive specialised lab space, industrial campuses, commercial buildings and housing for skilled professionals across biotech clusters.

Significantly, the scheme to revive 200 legacy industrial clusters will lead to improved land utilisation, drive redevelopment projects, modern warehouses, logistics parks, and ancillary commercial real estate in existing industrial towns. Besides the dedicated chemical parks will significantly contribute to the growth of real estate triggering demand for industrial parks and warehousing besides housing for working population.

The high-speed rail expansion through seven new corridors will improve long-term growth of real estate. In a related development, the dedicated freight corridors and national waterways will significantly contribute to the growth of logistics ecosystem in eastern and central India besides boosting industrial and warehousing development. The share of inland waterways and coastal shipping is expected to increase from 6% to 12% by 2047. Moreover, the container manufacturing scheme will promote industrial estates and manufacturing zones, stimulate demand for large-format industrial real estate, warehousing and logistics infrastructure near ports and transport nodes.

In order to promote data centres and digital infrastructure, the budget has allowed tax holiday until 2047, for foreign companies offering cloud services globally on the condition that data centre services are based in India. This will intensify demand for real estate.

Realising the growing potential of tourism, the budget has focused on destination development, tourism infrastructure and creation of a national destination digital knowledge grid. This will have a positive impact on real estate particularly in sectors like hospitality resort and mixed-use development. In a related development, the budget has paved way for states to develop five regional medical tourism hubs under a PPP model.

The establishment of infrastructure risk guarantee fund will aid lenders funding private infrastructure developers besides indirectly benefiting real estate development projects.

The central public sector enterprises have been allowed to unlock the latent value of government-owned real estate by establishing dedicated REIT structures. The cascading impact will lead to improved supply of institutional-grade real estate.

Significantly, the budget has paved way for education infrastructure development. The setting up of five university townships near major industrial hubs is expected to augur well in the support for development of student housing and ancillary real estate in education sector.

The enhancement of investment limit for PROI from 5-10% to 24% will boost foreign capital inflows into Indian real estate, besides improving financing costs, improving liquidity and project finance for developers.

Reduction in TDS rates and lower withholding requirements for small tax payers will directly ease cash flow pressures and improve compliance behaviour. In other words, TDS will now be deducted and deposited through the resident buyer’s PAN-based challan instead of the buyer requiring a TAN registration.

Overall, the Union Budget for FY 27 has maintained its stance on growth. At a time of uncertain global trade and India is engaging with major economies for FTA, the budgetary efforts clearly point towards the government’s intention to support medium-term growth and sustained investment flows. Indian economy is in a rare Goldilocks period of high economic growth and low inflation.

There are issues still eluding the policy makers like providing industry status to real estate sector to avail of institutional financing at competitive rates. The challenges before the government in tackling affordable housing imbroglio are formidable especially as soaring land prices, which is a state subject, awaiting eternal solution. However, it is heartening to note that a sum of Rs 79,000 crore has been earmarked for affordable and sustainable housing projects.

Is renting property flexible now for NRIs while investing in real estate in India? Sumanth Wilkins, Sharjah.

Today there are professionals to guide you to manage tenants, paper work and risk. Industry experts suggest a special power of attorney limited to specific tasks such as selling a property, rather than a broad general power of attorney. On sale, you can transfer only upto $1 million abroad. While capital gains are taxed at 12.5% alongside TDS obligations, rental income and sale proceeds are subject to taxation.

Is REITs a better option for investment for NRIs in India? Prakash Rangarai, Dubai.

The SEBI has reclassified REITs as equity instruments for the purpose of investment by mutual funds. REITs are safer investments than stocks, as they pool investor money to invest in regular income-generating assets such as office and retail space which offer predictable rent. Ninety per cent of the income earned by the REIT is distributed to investors.