The Covid-19 pandemic has brought with it a wide variety of changes to economies around the world. In India, the lockdown has had a massive impact on the real estate and infrastructure sectors. However, as the sectors began to revive, the lockdown was eased. Several innovations have emerged in both economies, many suggesting a stable turnaround. Here's how the markets are expected to perform in 2021. The budget has given a much-needed stimulus to infrastructure development, decreasing trade and transaction costs and increasing productivity. Besides, the focus on roads and rail will establish a common market for the seamless transportation of goods and human resources in India.
Infrastructure is a crucial driver of a country's economy and is known to play a pivotal role in defining properties' value in any particular region. The absence of a road, rail, or air connectivity to any specific part results in lower property rates than right physical infrastructure areas. Infrastructure is limited to connectivity alone, whose survival is a fundamental precondition for developing other kinds of civil amenities.
Union Budget 2021-22-
This year's budget has lived up to the expectations, both in content (allocation) and character (reforms), albeit with too much stretching of the financial space. This time the government has earmarked 34.5% more (Business to Business) than last year to infrastructure development and given equal weightage to all physical infrastructure, including roads and highways, railways, urban infrastructure, power, etc. The development of civic facilities is a time-consuming process and enhancement of connectivity provides the right way to the existing facilities during the development period. (Source- Financial Express)
-The government has allocated Rs 20,000 crore to establish and capitalize a Development Financial Institution (DFI) and a Rs 5 lakh crore lending portfolio created in three years under the proposed DFI.
-A considerable amount of money has been earmarked for on-going and new business corridors/expressways. This will undoubtedly help to boost up the real estate sector.
-The budget has given much-needed motivation to infrastructure development, reducing trade and transaction costs and improving factor productivity. (Source- Financial Express)
Moreover, the focus on roads and railways will create a combined market in India for seamless mobility of goods and human resources. In a developing and infrastructure-deficient nation like India, public investment in infrastructure is labor-intensive, masses in private investment and is the best way to heighten demand. Overall, the infrastructure sector is the champion in this year's budget.
- How will infrastructure boost real estate- However, its success lies in its efficient implementation and converging on projects with agile turnaround time. The reduction of Rs 1.5 lakh on loans taken for affordable housing units till March 2022 has been extended by a year. This is a delightful step for home buyers and developers whose affordable housing projects help from the tax extensions. The exemption for notified affordable rental housing projects for migrant workers is also a tangible announcement as it will give the coveted push to this emerging segment. The enhanced spending on public projects such as ports, railways, airports, and metros is expected to boost connectivity and economic growth on the infrastructure front. It will enhance the employment opportunities and attract the essential investment needed for economic revival. Several trends have emerged in the real estate sectors, mostly hinting towards a healthy resurgence. Here is how the residential & commercial sector is expecting to perform in 2021.
- Residential– The revival of the residential real estate sector is evident, with a sharp rise in sales in the last two quarters of 2020. Much of the credit behind this recovery goes to the low financing rates, stamp duty benefits and other monetary benefits that gave the customers a glorious opportunity. However, much of the recovery depends on the commercial synopsis and employment options. As of now, affordable and mid-segment properties are drawing most residential property buyers.
- Commercial– The commercial sector has indeed demonstrated noteworthy signs of recovery. Although understood that the segment would suffer due to the increasing adoption of WFH, commercial properties have pulled the most significant investors' percentage in numerous essential cities. As it is not always likely to get an optimal office environment at home, many companies spend in well-bred office spaces that meet the contemporary standards of comfort, infrastructure, and health. Moreover, several companies that plan to sustain their operations offline have been upgrading to larger offices where it would be desirable to maintain the social distancing norms.
Besides, commercial and retail hubs' improvement is an inevitable precondition to recognizing prices of residential properties and vice-versa. Homebuyers are tempted to housing hubs based on the availability of services and convenience, including shopping malls, supermarkets, banks, food and entertainment zones, leisure facilities and so on. The converse theory of commercial players and retailers getting attracted to populated housing hubs is also conventional.