Budget 2024: Housing, Infra In Focus; Emphasis on Rental Housing, Smaller Cities Remain Critical

Andhra Pradesh Chief Minister N. Chandrababu Naidu, a key ally, is expected to get a significant chunk of housing and infrastructure investment for his state. Andhra capital Amaravati's future would be an important part of the larger strategy this budget will present. Some region-specific strategies might also emerge in the budget. 

In 2023-24, the budget made generous allocations to housing and transport sectors to provide shelter for urban poor communities and to improve mobility infrastructure inside and between cities as well as states.

The big question, however, is: What will the Centre allocate for housing and infrastructure nationwide?

Housing Expectations

The 2023 budget allocated a large portion of funds to the newly extended Pradhan Mantri Awas Yojana (PMAY), which is set to continue until the end of 2024. The government has consistently increased funding for this central housing scheme.

Despite a parliamentary committee report highlighting poor targeting and slow progress in in-situ slum rehabilitation, the government has gone ahead with funding without any change to the scheme.

The budget is expected to follow suit, with additional financial assistance for Middle Income Group sections for buying houses in cities likely to be included.

As his third term began, PM Modi announced an additional 3 crore housing units under PMAY. This announcement is expected to influence the upcoming budget session, with allocations expected to match or slightly exceed last year's outlay.

Covid-19 has dramatically changed work, housing, and mobility in unimagined ways. Countless poor urban migrants were left without food or shelter, and were forced to walk to their villages. Some collapsed along the way, exposing not just India's social protection system but also a fundamental issue—housing.

The government introduced the Affordable Rental Housing Complexes rental scheme, which has not gained much traction except in Chandigarh, where it already faces legal battles.

More efforts and funds are needed to make rental housing a tangible solution. Financial incentives can encourage rental housing setups in terms of number and sustenance. Industry recently welcomed the decision to exempt rental residential properties from 18 per cent GST.

However, much more can and needs to be to accomplished in the housing market to ensure rental housing for poor migrants, single women, transgenders, students, informal workers, industrial workers, and others.

Land should be allocated and reserved near industrial areas and the like, by incentivising FSI and relaxing building norms. The budget can direct these initiatives.

Grand Transportation Plans and Smaller Cities to Be in Focus

The Interim Budget 2024-25 set a new record for infrastructure outlay by earmarking Rs 11,11,111 crore, surpassing the previous high of Rs 10 lakh crore allocated during fiscal 2023-24. This ambitious allocation aims to achieve goals of faster access-controlled highways, super-efficient ports, safer and speedier trains, and cleaner, decongested urban areas.

With an 11 per cent increase already in the interim budget for infrastructure, doing more will be important and critical. But this does not necessarily mean it’s for select large cities; it needs to accommodate 2nd and 3rd tier cities and they would need big allocations.

The larger cities are already under increased pressure leading to deteriorating infrastructure that hits everyday urban life. Smaller cities and towns that have been growing well and could do with investment to take the stress off larger urban centres.

In her 2023-24 budget speech, Finance Minister Nirmala Sitharaman presented a vision for Amrit Kaal, emphasising the seven priorities– ‘Saptarishi’ for an empowered and inclusive economy.

As part of this vision, the new Urban Infrastructure Development Fund (UIDF) was established through the Priority Sector Lending Shortfall. This fund will be used by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities.

Managed by the National Housing Bank, the UIDF has an initial corpus of Rs 10,000 crore.

The seven priority areas will be in focus and more allocations and strategies are expected to make this fund larger and larger to accommodate as many smaller cities and towns as possible. 

Then, the focus on mobility is expected to be big. Prime Minister launched  PM Gati Shakti - National Master Plan for Multi-modal Connectivity, essentially a digital platform to bring 16 Ministries, including Railways and Roads together for integrated planning and coordinated implementation of infrastructure connectivity projects. 

Multi-modal connectivity will allow seamless movement of people, goods and services from one mode of transport to another. It will facilitate last mile connectivity of infrastructure and reduce travel time for people.

During the 2023-24 budget, the PM had noted that India's capital expenditure has increased fivefold since 2013-14, with a target of investing Rs 110 lakh crore.

He highlighted PM Gati Shakti National Master Plan as a key tool for integrating economic and infrastructural planning, with 100 critical infrastructure gap projects prioritised for development in FY 2023-24 and an allocation of Rs 75,000 crore, which is expected to increase significantly in the upcoming budget session.

As we move forward, funding new approaches like rental housing and focusing on smaller cities is crucial. The ownership-based housing models and constant development of large cities have not succeeded in the long-term and have hurt urban development. 

Development should be flexible, with amenable options, and be geographically distributed to benefit everyone. The first budget of the NDA government's third term may set the tone for India's urban development for the rest of the decade.