What Does Union Budget 2017 Spell CRE Sector?

What Does Union Budget 2017 Spell CRE Sector?

The much-anticipated Union Budget 2017 was revealed earlier this month. Prior to the revelation of the Union Budget, it was widely expected that the government would put an end to the woes of the commercial real estate sector which has been hit post demonetization, reeling under the pressure of disproportionate inventory and subdued demand. Many genuine buyers in the commercial real estate market were holding back their investment plans with the hopes that the interest rates would fall further and the property prices would plunge post demonetization, which some see as ‘cleansing’ of a sector infested with illicit funds.

Now that the Budget 2017 is out, the wish list raised by stakeholders of the commercial real estate sector remains unfulfilled. The Budget 2017 primarily caters to low-cost housing segment. The commercial real estate sector was looking forward to seeing more government participation in incentivizing commercial property development. The growth of commercial property directly results in demand for residential, retail and hospitality sectors. It was widely expected that the government would consider offering incentives for developers to construct more commercial spaces with an aim to help attract foreign investments and position India as a business powerhouse.

However, on the positive side, the Budget 2017 does encompass significant funds for the development facilities such as roads, water supply, sewage systems, electricity, etc. A total allocation of Rs. 39,61,354 crore has been made for infrastructure. Additionally, Rs. 1,26,000 crore is set aside for energy production based investments. Once these infrastructural facilities are improved, genuine Indian and international commercial real estate players will come forward for development of commercial properties.

While the Budget 2017 does prove to be a landmark for the residential real estate market, it does not focus much on the commercial real estate sector. The Finance Minister, Arun Jaitley, brought affordable housing under the infrastructure sector, extending benefits to the people investing in building low-cost homes. We can only hope that once this requirement of “homes for all” is satisfied, the government will move its focus on the commercial real estate sector and thereby focus on “jobs for all”.

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