Industry experts list down a few decisions that if taken up in the upcoming Union Budget will prove beneficial for the real estate market
The Union Finance Minister Nirmala Sitharaman is set to present the Union Budget on February 1, 2024. The real estate sector is expecting some significant announcements that will spur growth and homebuying sentiment in the country. So, we ask a few real estate experts their expectations from the budget to propel the sector towards a fruitful year.
Industry status to the real estate sector
Last year was a golden year for the sector as the sales and launches broke various records. Sadhav Mishra, partner, SNG & Partners, Advocates & Solicitors says, “The expectation that the real estate sector should be considered as an independent industry is long overdue owing to the sector playing a pivotal role in the economy and the GDP. Such a move will not just be beneficial for the realty sector, but the positive impact will cascade onto other related industries like banking and construction as well. The expectations are also surrounding single window clearance along with GST rationalisation.”
Revival of the affordable housing segment
Despite government initiatives such as the Pradhan Mantri Awas Yojana (PMAY), widespread homeownership remains elusive for a larger section of the society. Vivek Rathi, national director of research, Knight Frank India shares, “The predominant dream of most Indians is to own a home, a formidable task in a developing nation like India. Affordability is a major hurdle, with many prospective homebuyers unable to reach the right property due to financial constraints. The Union Budget has historically offered relief through tax deductions for home loans, but there’s room for improvement to truly impact affordability.”
Elaborating on the same, Ravi Subramanian, MD and CEO, Shriram Housing Finance Ltd. says, “Affordable housing should get preferential treatment. The 2023-2024 Union Budget supported the affordable segment by extending tax benefits to homebuyers and developers. It allowed interest deductions on affordable housing loans.
Focus should now be on Affordable Rental Housing Projects, targeted at migrant workers, which is a non-starter at present.”
Modification in qualifying standards for affordable housing
There is an urgent need for some modifications in the standards set for the affordable housing segment. “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 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 metropolitan 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 homes. The government needs to relook at adjusting the qualifying cost of properties within cities’ affordable housing segment. Although the units’ defined size of 60 square metres is reasonable, the prices of up to Rs 45 lakh make them unattainable to a huge share of the target clientele. However, it’s also true that a budget of
Infrastructure spending in peripheral areas
The government is focusing on various infrastructure projects across India. However, a more focused approach to peripheral areas is also required so that new markets open up for the real estate sector. Rajeev Sikka, entrepreneur and real estate consultant opines, “Allocation of funds for infrastructure development in peripheral areas of major cities to make them more attractive for real estate development will also lead to better connectivity, improved water and electricity supply, and enhanced public amenities. This is because investing in infrastructural development in peripheral areas not only creates new real estate markets, but also relieves pressure on congested urban centres.”
Home loan interest rate rebate
Currently, the tax rebate on home loan interest rate is Rs two lakh under Section 24 of the Income Tax Act. Experts and homebuyers believe that the rebate should be increased to at least Rs five lakh. “Considering how the realty sector is booming, it is important to make it affordable for everyone, making it crucial to increase tax rebate. Other parameters such as reducing repo rates and offering tax holidays to developers should also be considered,” suggests Mishra.
Increased allocation to PMAY
“The Centre must increase its allocation to the PMAY, which has the potential to unleash heightened economic activity in the rural areas. In FY24, the allocation was Rs 79,000 crore. In FY23, it was Rs 48,000 crore. Every year we see a substantial jump in the allocation to this category. The demand for housing is so strong in the rural economy that it will have a strong bearing on the lives and living standards of the people there,” shares Subramanian. With plenty of such suggestions and expectations for an ideal real estate market in the upcoming year, experts believe that the demand is expected to see good numbers in 2024 as well. It remains to be seen how many of these expectations see the light of the day.
Mayank Ruia, founder and CEO of a real estate company suggests:
- Simplifying capital gains tax provisions: Acknowledging the intricacies of the capital gains taxation structure, which involves multiple factors such as asset classification, residential status determination, and computation of acquisition costs, the Budget is expected to introduce measures aimed at simplifying these provisions. This move would alleviate the compliance burden on taxpayers, potentially leading to higher levels of compliance and improved revenue collection;
- Reinstate input tax credit for real estate: The real estate industry is expecting reinstatement of input tax credit, particularly for residential projects with higher GST. This measure is seen as crucial for controlling property prices and ensuring affordability without compromising on quality;
- Reducing GST rates on construction materials: Another key expectation is a reduction in GST rates on construction materials. This move is intended to help strike a balance and promote affordability in the real estate sector without compromising on the quality of construction materials;
- Strengthening RERA and GST regulations: This will create a transparent and consistent regulatory environment, instilling confidence among investors and developers alike, and fostering an atmosphere conducive to sustained growth.