Pre-Budget Buzz: Can Infrastructure, Logistics & Real Estate Maintain Momentum in 2024?

As the Union Budget for FY 2024-2025 draws near, all eyes are on the government’s spending plans. Three sectors – infrastructure, logistics & transportation, and real estate – have been major beneficiaries of recent budgets. Let’s look at how these sectors have fared and what to expect in the upcoming fiscal year.

Infrastructure

The infrastructure space has been the focal point of this government which indeed has given an extremely strong impetus to India’s economic growth. Since COVID, the budget allocation for the infrastructure space has grown 2.5x, from ~₹4.12 lakh crores to ~₹10 lakh crores. In conjunction with the strong allocation, a slew of policy measures have been announced. The likes of the National Infrastructure Pipeline have yielded close to 9.8k projects spread across 59 sub-sectors with a total project cost of ~$1845 billion. The recent introduction of the Gati Shakti plan has been successful in bringing in synergies and making connectivity smarter and faster. As a result, we have witnessed the stupendous rise of companies in this sector as almost every infrastructure company has experienced a dramatic surge in their order books. The future outlook for all the sector seems to be very positive as a whole host of new initiatives are being undertaken to propel this space further. The government is expected to continue its dedicated focus on Indian infrastructure in this budget and make further progress towards futuristic projects.

Logistics & Transportation

The logistics & transportation in the country have undergone a serious transformation as government policies and support measures have taken this sector to new heights. Amongst the different components in the sector, the two standout performers have been roads and railways. The budget allocation has doubled over the last four years from ~₹2.4 lakh crores to ~₹4.7 crores. As far as policy support is concerned, one of the most pertinent policy support has been announced in the form of a Dedicated Freight Corridor (DFC). The DFC will significantly improve the efficiency of goods transportation across the country, reducing transit times and costs. In its short-lived history, the DFC has already commissioned 2843 kilometers covering the eastern and western zones. On the back of such impressive developments, transporting stocks like railway, port, and road-related stocks have become markets’ favorites. Companies like Adani Ports have been riding high on the increased logistics activity in the country and companies like CONCOR have been an integral part of the upcoming railways infrastructure. Not to mention, that the future of this sector is looking bright and it is expected that this year’s budget will have dedicated policy measures being announced.

Real Estate

The Indian housing cycle caught an upswing post-2020 after a 7+ year-long consolidation period. The boom is to that extent where housing inventories are at a 12-year low and demand is outpacing supply. Housing volumes have surged ~25% in 2023, almost doubling in 3 years. The entire real estate market in India has been running hot given the gush of demand. Significant amounts of budget allocation have gone towards urban and affordable housing. In 2020-21, the government allocated around ₹12,000 crores for urban housing under the Pradhan Mantri Awas Yojana (PMAY) which increased to ₹47,500 crores in 2023-24. The government has announced many smart policies such as the Credit Linked Subsidy Scheme (CLSS) which provides interest subsidies on home loans for the economically weaker section. Also, various state governments have announced a reduction in stamp duty which further encourages real estate demand. Realty companies have witnessed once-in-a-lifetime pre-sales and booking numbers. Besides residential players, commercial players have also been riding on strong growth as office occupancies rise and mall footfalls increase. Overall, with robust policy support and substantial government spending, the real estate sector in India is poised for significant growth, contributing to the country’s economic development and providing housing for millions.

Apart from these sectors, over the past few years, the government has put in a lot of work on sunrise sectors like defence and renewable energy. Not only has the government allocated funds, but also various staunch and effective policy making has been done around these sunrise sectors which has brought about the impetus. One common game changer has been the Atmanirbhar Bharat initiative. This has brought about radical change in various industries as self reliance measures have led to massive value unlocking. As a result, stocks from defence and green energy space have done tremendously well on the bourses.

It shall be interesting to see how the finance ministry views these sectors in this budget.

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