Budget 2023: Investment in BE will have multiplier effect on the economy

India is on a mission to become a $5 trillion economy by 2027. The country’s economy, therefore, needs to clock-in a consistent 9-10% annual GDP growth in the next 4-5 years. This kind of growth cannot be achieved organically, and the Indian government is well attuned to this fact. The government needs to continue to provide the right types of impetuses in right quantum in its quest to achieve this goal. A key catalyst and also a significant measure of the overall growth of any economy is development of its infrastructure and built environment sector through direct and indirect investments and efforts. With the government eyeing the USD 5 trillion figure, we recommend and expect the government to take the following direct and indirect measures related to the BE sector in the forthcoming budget 2023.

• The Indian government should focus on increasing their spend on creating housing and infrastructure as it will have a far-raging multiplier effect on the economy. The RICS Global Construction Monitor report for Q4 2022 highlight firm Construction Activity especially in the area of infrastructure where workloads saw a sharp increase. A further increase in government spending will give a huge push to the economy. Over 250 industries serve the built environment sector and offer employment to millions of Indians. Increased investment in housing and infrastructure sector will have a positive domino effect by directly bringing growth to all the allied industries and increase in employment opportunities.
• Affordable housing continues to be a major requirement for Indian masses.The RICS Global Construction Monitor report for Q3 2022 has highlighted firm residential activity in India.But it is observed that even when budget homes are available, a huge segment of the population is unable to afford their own homes due to lack of self-owned resources and/or affordable finance. RICS recommends that as an indirect measure to support the BE sector, the government must provide trusted conduits that make available affordable finances to the home-seekers. To increase activity in the mass housing sector, the 2023 budget must ensure that home loans are available at cheaper rates.In addition to providing cheaper loans, the current tax benefit of ₹ 2 lakhs on interest on home loan should be increased to ₹ 5 lakhs.
• Indian BE sector needs more last mile funding opportunities as the existing SWAMIH Fund with ₹ 15,000+ crores, though admirable, is still inadequate. The government must encourage private entities like large banks and financial institutions to come out with at least 2 to 3 more funds of over ₹ 1 lakh crore value to help in completion of various projects stuck in the last stages. The completion of stuck projects will have manifold effects – increase in real estate supply in the market for the buyers, boostin the state’s financial resourcesthrough increased revenue generation through stamp duty on registrations,and free up the lenders’ capital stuck in the projects.
• The BE sector has a high need for skilled manpower. A surge in built environment activities has created a visible skills gap at the apprentice level. Monetary impetuses apart, there is a crying need for skill building in the sector. The government must focus on skilling at the apprentice level and seek support ofcorporates and education institutions. Provisions must be made in the budget to decentralize training so that more people have opportunities to enhance their skills at skilling centres run by private institutions and international professional bodies duly approved and regulated by the government. This approach will help address the skills gap while enhancing the rate of employment.

There is a need for government to encourage private sector investments through Public Private Partnership (PPP) to augment the infrastructure growth in the country. However, to achieve higher investments from private sector in infrastructure projects, government needs to ensure faster land acquisition and prompt dispute resolution process. The government should encourage structured and best international alternative dispute resolution mechanism for effective and speedy resolution of disputes in infrastructure sectors. RICS DRS launch in India will play crucial role for development of alternative dispute resolution services and arbitrator and mediator profession.

Last but not the least, in the larger scheme of things, focus of both the government and industry professionals must remain on the sustainable development of the sector. The RICS sustainability report 2022 has highlighted significant increasein theclimate risk assessments on buildings. Government should promote sustainable development of the built environment. RICS can support this, with our professionals expertise, and our international standards like ICMS, IBOS, as well as Sustainability and ESG in commercial property valuation advice.

The writer is Managing Director, South Asia, RICS

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