A market guru explains why real estate, housing and textiles should get some budget boost

• The real estate sector has shown signs of recovery in 2021 as it reached nearly 90% of pre-COVID numbers.
• It is expected to contribute 13% to the country’s GDP by 2025 as per IBEF’s report.
• Focusing on real estate and textiles will create a lot of opportunities for the bottom of the pyramid people, Kotak Mahindra Mutual Fund’s CEO said.

India has been eagerly waiting for Finance Minister Nirmala Sitharaman to open up her bhai-khata (ledger) and announce this year’s union budget.

Like always, industry experts and market enthusiasts have already started speculating on major announcements that may come up this year. While the investment bankers are hoping for pro-market policies, health experts are speaking on incentivising preventive healthcare.

Amidst all this, Nilesh Shah, the managing director and chief executive officer (CEO) of Kotak Mahindra Mutual Fund, is pitching for better policies for two sectors that are among the highest employers in the country— real estate and construction, and textile industry.

Shah, in a conversation with Business Insider, highlighted, “This budget has to focus on consumption, which is necessary for reviving or accelerating the growth today.” Focusing on these two sectors can make all the difference, he added.

‘Real Estate is revving, but more needs to be done to reach its potential’

The real estate sector has shown signs of recovery in 2021 as it reached nearly 90% of pre-COVID numbers. This was possible due to Sitharaman's proactive approach to reduce stamp duty tax and the extended tax benefits on affordable housing in the last budget.

Shah, however, feels that the number can get even higher if focus is more aligned towards the housing as well as construction sub sectors. “Real estate and construction stars are aligned for rapid growth. House prices have remained consistent or fallen in the last 2-3 years. Affordability for one section of the society has improved,” he notes.

The government of India can now consider arming up its last year’s approach with three new policies. First, providing tax incentives for people buying their first house. Second, getting higher concessions on your interest on housing loans or principal repayment. Third, giving stamp duty concessions so that people prepone their purchases.

“Whichever way you think appropriate if housing, real estate is supported further we will see improvement in housing and construction, and a lot bottom of the pyramid people will get employment in this sector,” he said, emphasising that it’s time to bring housing to 12.5-13% of India’s gross domestic product (GDP).

The real estate sector in India contributes 6-7% to the country’s total GDP in 2020. It is expected to reach a market size of $1 trillion by 2030 and contribute 13% to the country’s GDP by 2025, according to a India Brand Equity Foundation (IBEF) report.

‘The transition from supplier to manufacturer is an important one for the textile industry’

India is among the largest cotton producers in the world, one of the largest yarn spinners and big in fabric weaving. Yet, it has no ranking in the biggest value generator of the textile industry — garmenting.

“We grow cotton, spin yarn, weave fabric and then pass it onto someone else to make garments,” Shah added. He further added that the government of India should focus on ramping up garmeting in India.

China is the largest textile manufacturer and exporter in the world.

Source: Statista

Meanwhile, the Apparel Export Promotion Council (APEC) has urged the government of India to remove import duty on cotton for boosting apparel exports. The association’s chairperson Narendra Goenka also believes that the government could remove the 11% import duty on cotton to boost the domestic industry.

“It is our major demand because raw material prices in India are very high. So that the mills can import cotton at lower prices. Cotton and yarn prices have gone up by 70-80% [in the last one year] and that is creating hurdles for garment exports,” he was quoted as saying, by ANI.

“If we focus on real estate, construction and textiles sectors we will create a lot of opportunities for the bottom-of-the-pyramid people,” Shah concluded.

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