The real estate sector in India is a major player for several reasons. As the demand for housing grows, there’s a need for more homes, office spaces, and commercial areas. Real estate development fulfils this need and shapes the physical landscape of our cities.
Given this importance, it’s no wonder the real estate sector keenly awaits the Union Budget every year. With the Union Budget 2024-25 set to be tabled in July, the real estate sector pins renewed hope on the Modi 3.0 regime.
Also Read: Top Indian Cities See 50% Drop In Rental Growth As Housing Supply Rises
The budget might propose changes in taxation rules for property purchases, deductions for home loans, or infrastructure projects that could impact real estate development.
Union Budget 2024 Expectations: Real Estate
Anuj Puri, chairman, Anarock Group, said that expectations are high for tax reliefs and other sentiment boosters.
Puri added that the future of the overall industry also depends on unfettered infrastructure deployment to support and improve urban living standards as well as to develop and promote newer areas.
Industry Status
Puri also underlined the long-standing demand of the sector, the ‘industry status’ for the entire housing sector.
Other hopes also revolve around the budget. “Will it take ‘real’ measures to revive the affordable housing segment, which has been on a steady decline after the pandemic?” Puri hoped.
The Indian housing sector remained upbeat in 2024 till date, with housing sales and new launches creating new peaks in the top 7 cities. Sales reached an all-time high at about 4.93 lakh units in FY23-24, while 4.47 lakh units were launched.
However, this momentum must continue in the future too – and the current growth trajectory is skewed towards mid-range and premium housing.
Considering the specific housing needs of India’s lower-income groups, this momentum cannot ride solely on higher-priced homes while affordable housing continues to languish.
As per Anarock Research, the sales share of affordable housing reduced significantly after COVID-19 – from over 26% in 2022 and over 38% in 2019 to approx. 20% in Q1 2024. Due to low demand, this segment’s share of the overall housing supply in the top 7 cities also fell to 18% in Q1 2024, from nearly 40% in 2019.
Many interest stimulants previously extended to buyers and developers of affordable housing have expired in the last two years. This important segment must be revived with high-impact measures like tax breaks – for developers so that they will focus more on affordable housing, and for buyers to improve affordability.
According to Anarock, other measures to reignite affordable housing would be:
Credit-linked subsidy scheme under PMAY
This scheme for EWS/LIG, which expired in 2022, should be revived to incentivise first-time buyers of affordable homes across cities. This will once again invigorate demand in this segment. Subject to criteria specified under government guidelines, CLSS was previously available for housing loans to EWS/LIG buyers in new constructions, and for the addition of rooms, kitchens, toilets etc. to existing dwellings.
Also, under PMAY (Rural), one could avail of this subsidy for all ‘kaccha’ homes being converted into ‘pucca’ ones, provided they fulfil the eligibility criteria.
Re-introduce a 100% Tax Holiday for affordable housing developers
To boost supply and incentivise developers to build more affordable housing, the government can re-introduce the ‘100% Tax Holiday’ benefit they previously enjoyed under section 80-IBA in the Finance Act, 2016. This section provided for major tax relief on the profits earned from developing and building affordable housing projects.
Tweak the definition of affordable housing criteria to widen additional deductions benefits to more buyers
According to the Ministry of Housing and Urban Poverty Alleviation, affordable housing is defined based on property size, price, and buyers’ income. For instance, affordable housing is a house or flat with a carpet area up to 90 sq. m. in non-metropolitan cities and towns, and 60 sq. m. in major cities and valued up to Rs 45 lakh for both. The central bank’s definition, on the other hand, is based on the loans given by banks to people for building a house or buying apartments.
Puri urged that the government must seriously reconsider revising the pricing of homes within the affordable housing budget, taking into consideration city-specific market dynamics. As per the current definition, the size of units at 60 sq. m. carpet area is appropriate. However, prices of units (up to Rs 45 lakh) are not viable across most cities.
For instance, for a city like Mumbai, a Rs 45 lakh budget is meaningless. It would need to be increased to at least Rs 85 lakh.
In other top cities, the budget should be increased to at least Rs 60-65 lakh. With such price revisions, more homes would qualify for the affordable price tag, so more buyers can avail of benefits such as lower GST rates at 1% without ITC, government subsidies, etc.
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