As the Union Budget 2024 approaches, stakeholders in the real estate sector are voicing their expectations, underscoring the need for growth and stability in the industry.
With Union Finance Minister Nirmala Sitharaman set to present the interim Budget on February 1, all eyes in the real estate sector and the nation as a whole are focused on the crucial measures that will shape the industry's trajectory in the coming fiscal year.
The real estate community looks at the upcoming budget with hope, seeking a strategic roadmap that aligns well with the evolving needs of stakeholders including end-users, developers, and investors.
“Housing, infrastructure development, sustainability and digitization will remain at the core of the budget, which will go a long way in supporting real estate growth across segments in the long term. Enterprise value (EV) infrastructure, renewable energy and green financing will continue to remain in focus creating a strong base for a sustainable future. Incentivisation of green buildings through minimum alternate tax or tax breaks similar to infrastructure sector will be particularly beneficial.”
“Meanwhile, retail investors are calling for additional rationalising of the capital gains tax structure. The Union Budget 2024-25 should explore initiatives to boost greater retail engagement in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).
Moreover, alterations to personal tax slabs have the potential to fuel consumption across various sectors, including real estate assets and allied sectors,” Badal Yagnik, Chief Executive Officer, of Colliers India, a real estate services and investment management company, said.
Moreover, the homebuyers are anticipating increased tax benefits in the upcoming budget. One key expectation is to elevate the current Rs 2 lakh tax rebate on housing loan interest under Section 24 of the Income Tax Act to a minimum of Rs 5 lakh.
“This adjustment is crucial to bolster housing demand, especially within the affordable housing segment. Additionally, a reassessment of the price bracket for affordable housing is necessary, particularly in cities like Mumbai, where the current limit of Rs 45 lakh is impractical. Raising this limit to Rs 75 lakh or beyond will significantly benefit a broader spectrum of homebuyers, fostering affordability and driving housing demand. Furthermore, a reduction in the prevailing 20 per cent capital gains tax is recommended. This move will incentivize investments, subsequently fostering increased economic growth and stability,” Piyush Bothra, co-founder and Chief Financial Officer, Square Yards, a proptech platform, said.
While the real estate industry’s outlook for 2024 is currently positive, the results of the upcoming general elections will also have a significant impact on the demand for and growth in residential real estate.
The real estate industry invariably presents the Finance Ministry with a very ambitious wish list every year before the annual Union Budget. Industry status for the housing sector and single-window clearance for housing projects are standard asks and remain in place this year, as well.
Since the pace at which the issues that the real estate sector faces get resolved is generally quite slow, these expectations haven’t changed much – though they’re as pressing as ever.
That said, we must have reasonable expectations for the interim budget, which will be unveiled before the general elections.
Here are some of the other key expectations from the real estate stakeholders:
“It is necessary to increase Section 24 of the Income Tax Act's Rs 2 lakh tax rebate on home loan interest rates to at least Rs 5 lakh. Doing so could stimulate a more robust housing market, particularly in the budget homes segment, which has seen a decline in demand since the pandemic,” Anuj Puri, chairman, Anarock Group, a real estate service provider, said.
Given how badly the epidemic affected this segment's target audience, affordable housing has been affected severely.
According to Anarock research, the previously much-touted budget homes category saw a decline in overall sales - to approximately 20 per cent in 2023 from over 30 per cent in 2022, and nearly 40 per cent in the period before to the pandemic.
Not surprisingly, this segment's percentage of the total housing supply in the top seven cities also fell to 18 per cent in 2023 from nearly 40 per cent in 2019.
Several interest stimulants that were offered to developers and consumers in this market over the years have expired in the last one to two years.
According to experts, It is imperative to revive and extend significant benefits, such as tax breaks, to encourage developers to construct more affordable housing and to make it possible for customers to acquire such homes.
The Ministry of Housing and Urban Poverty Alleviation defines affordable housing as being determined by the buyer's income, the size of the property, and its price.
Affordable housing is defined as a house or an apartment valued up to Rs 45 lakh, with a carpet area of up to 90 square metres, located in non-metropolitan cities and villages, and 60 square metres in large cities.
The definition provided by the central bank, however, is based on the loans that banks provide to individuals so that they can purchase apartments or build houses.
The government needs to take a hard look at adjusting the qualifying cost of properties within cities’ affordable housing segment. Although the units' defined size of 60 square meters is reasonable, the prices of up to Rs 45 lakh make them unaffordable to a huge share of the target clientele.
For example, a budget of less than Rs 45 lakh is irrelevant for a metropolis like Mumbai; it should be increased to at least Rs 85 lakh. The budget should be raised to at least Rs 60–65 lakh for other large cities.
With this price adjustment, more homes will be within the reach of more buyers, who will be able to take advantage of other advantages such as government subsidies, reduced goods and services tax (GST) rates at one per cent without input tax credit (ITC), etc.
“Addressing the land shortage for this vital housing segment is also necessary. Certain lands that are owned by the Indian railways, port trusts, departments of heavy industries, etc., may be released by the corresponding government agencies. When this land is released at low cost specifically for affordable housing, it will also significantly lower real estate prices overall,” Puri added.
