It is broadly estimated that the market size of the Indian real estate sector would reach USD 1 trillion by 2030 and it would account for around 19-20 percent of the country’s GDP. The housing and construction sector in the country is the second largest employment provider in the country after agriculture and has proactively essayed a multiplier effect in the growth and development of the Indian economy. Even as the country reeled under the unprecedented effect of COVID-19, the residential real estate sector in the country showed a marked resilience to its adverse impact.

The demand and supply sentiments in India’s housing segment have witnessed a revival on the back of low home interest rates, government sops like reduction in stamp duties and giving a discount on construction premiums paid by builders. The upbeat mood in the market was also evident from a strong rise in property registration and sales in 2021 which almost reached pre-pandemic levels. The improved momentum in the country’s housing property market is widely expected to sustain in 2022. Developers are hoping that the upcoming Budget 2022 would set the tone for the sector to scale a higher growth trajectory on the back of supportive reforms and suitable policy interventions.

FM Nirmala Sitharaman should focus on raising tax deduction limits substantially on home loans in the budget. A key proposal would be to raise the limit for home loan interest deduction for tax rebate to around 10 lakh for homeowners under Section 24 of the Income Tax Act. This would not only reduce the taxable income of homeowners but provide a much-needed impetus to demand for residential real estate in the country. Access to an asset class in the form of their own home will enable consumers to avail the benefits of price appreciation over a period of time. They can get an attractive return on their investment if they decide to sell their property in the course of time or earn rental income by leasing out extra space.

Budget proposals will need to place onus on driving the private sector to invest in the country’s affordable housing sector. Developers having sizable land holdings can be granted a higher FSI of 2.5 and above for high end housing if they are willing to use their land parcels for building significant numbers of low-cost housing stocks in metros and Tier 1 and 2 cities. The budget will also need to emphasize on laying the roadmap for a robust Public Private Partnership (PPP) model wherein the resource potential and project expertise of private developers can be leveraged for the construction of affordable houses. The emphasis will need to be on enhancing affordability of houses with a view to create a wider base of homebuyers and creating the right policy framework to incentivize builders and lenders towards building a strong and sustainable affordable housing ecosystem.

The apartment sizes notified in the current context are very small and will need to be significantly increased in metros and non-metros. If, for instance, current sizes are specified at 60 sq mt in non-metros, it is only leading to high population densities and creating slum clusters. This can lead to faster transmission of infectious diseases like COVID-19 and put a severe strain on the health infrastructure of cities. The government will need to renotify apartment sizes in metros and non-metros with a view to reducing population densities and making healthy living spaces for people.

Pradhan Mantri Awas Yojana-Credit Linked Subsidy Scheme (PMAY-CLSS) should be extended to another three years. The budget should make provisions to encourage the average investor to invest in Real Estate Investment Trusts (REITS) to avail advantages of portfolio diversification and earn steady dividend income without taking the risk of directly investing in real estate projects. Suitable tax exemptions should also be provided for investments in REITS. Long Term Capital Gains (LTCG) tax should be reduced and holding period of assets should also be slashed.

States should be allowed to transfer real estate holdings to family members and family trusts without burdening them with the levy of stamp duty and registration charges. The concept of deemed income on second or additional homes should be done away with as its taxing component discourages people from buying additional homes.

States should be discouraged from continuing with archaic laws of allowing only farmers to buy agricultural land holdings. All citizens of India should be allowed to buy land in any part of the country and no obstacles should be created for Indians to buy and sell land in India.

Stakeholders from the housing industry should be invited to provide suggestions on making construction finance convenient and affordable by easing regulatory compliances for HFCs and NBFCs.