Budget 2024: From interest rate subsidies to tax breaks, the housing sector expects growth and stability

EU budget for 2024: As Finance Minister Nirmala Sitharaman gears up to present the first Budget of Prime Minister Narendra Modi’s third term, the real estate sector is buzzing with anticipation. Industry players are hoping for measures that will drive growth and stabilize the market. Key stakeholders have been vocal about their priorities, advocating for reforms and initiatives that will address critical challenges and promote sustainable development in this crucial Budget.

Tax breaks for home buyers

Prashant Sharma, president, NAREDCO Maharashtra, said that increasing tax breaks for homebuyers, especially under Section 80C and Section 24(b), will provide a much-needed boost in housing demand.

“Increasing the limit on home loan interest deduction will make home ownership more attractive and affordable for the common man,” added Sharma

Sharma also suggested the following measures;

Single clear window: Introducing a single window cleaning system for all property projects would streamline approvals, reducing delays and costs. This move would speed up project completion and make it easier to do business in the industry.

Affordable Housing Incentives: A continued focus on affordable housing is critical.

“We urge the government to extend benefits under Pradhan Mantri Awas Yojana (PMAY) and provide additional incentives to developers involved in affordable housing projects. Moreover, there is a need to redefine the definition of affordable housing, proposing to increase the limit from Rs 45 lakh to Rs 1 crore, especially in metro cities. This will help bridge the housing gap and provide housing to the economically weaker sections of society by increasing both affordable and mid-segment housing,” Sharma said.

Solving liquidity problems: The real estate sector continues to struggle with liquidity issues.

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“We expect the Budget to introduce measures to provide developers, especially small and medium enterprises, with easier access to finance. Improving the flow of funds through banking and non-banking financial institutions is essential to sustain the project momentum. There is also a need to increase the SWAMIH stress fund and create a second tranche of Rs 50,000 crore to complete stalled real estate projects and ensure adequate liquidity.

Land Acquisition Reforms: Simplifying land acquisition processes and reducing related costs will be important for the revival of development activity. A transparent and fair land acquisition policy will encourage more developers to undertake new projects.

Focus on renting apartments: To meet the needs of urban populations and migrant workers, policies that promote rental housing should be prioritized. Incentives for developers to build rental housing projects will help meet the housing needs of a diverse population.

Digital transformation: Encouraging the digital transformation of the real estate sector through technological advancements and digital infrastructure will lead to greater transparency and efficiency. Incentives to adopt PropTech solutions will further modernize the sector.

The state of infrastructure for real estate

Pritam Chivukula, co-founder and director, Tridhaatu Realty and vice-president, CREDAI-MCHI, called for granting infrastructure status to the real estate sector.

“This will facilitate access to finance at lower interest rates. This move will not only reduce the cost of capital for developers but also accelerate the pace of infrastructure development, leading to overall economic growth,” Chivukula said.

Chivukula also suggested introducing policies and incentives to promote rental housing, which will help meet the housing needs of the growing urban population. This includes tax breaks for rental income and programs to encourage private participation in rental housing projects.

Revitalizing Stressed Out Projects

Chivukula stressed the need for special regulations and financial packages to revive stalled and burdened real estate projects, which will help protect the interests of homebuyers and ensure completion of projects. This will also help clear unsold inventory and revive the real estate market.

Resumption of the CLSS program

Mohit Jain, managing director, Krisumi Corporation, said, “Given the government’s continuous efforts to provide housing for all, we also anticipate the relaunch of the CLSS scheme which will increase the demand for housing across segments.”

Jain also stressed that the government should also consider implementing a single window system for all project-related approvals, which is a long-pending demand from the industry. This will significantly reduce delays, which will benefit all stakeholders including the government, developers as well as end users i.e. home buyers.

GST reform in the real estate industry

Vedanshu Kedia, director, Prescon Group, believes that the current Goods and Services Tax (GST) structure for the real estate industry needs to be rethought.

“Real estate is the most capital-intensive industry and we believe that allowing input tax to be deducted from expenses incurred by real estate companies can not only help developers better manage their cash flow, but also help rationalize prices for end users and make them more affordable. We are also in favor of rationalizing GST rates to make them simpler and cheaper. A streamlined GST regime will reduce the overall cost burden on homebuyers and developers, promoting greater activity in the sector,” Kedia added.

Kedia also appealed to the government to change the taxation of capital gains to make it more favorable for real estate transactions.

NRI and Real Estate

Kedia noted that non-resident Indians (NRIs) have always had a significant share in the Indian real estate market.

“We recommend introducing policies that make it easier for domestic research institutions to invest in Indian real estate. Simplifying regulations, providing tax benefits and ensuring a smooth repatriation process will attract more investments from NRIs, thereby strengthening the sector,” Kedia added.

Focus on Millennial Buyers

Samyak Jain, director, Siddha Group, emphasized that millennials now constitute a significant portion of potential home buyers. However, rising real estate prices and tight financing options often make home ownership a distant dream for many.

“We urge the government to introduce targeted programmes specifically aimed at millennials and first-time homebuyers. Making homeownership more accessible to this demographic will not only meet their aspirations but also inject new demand into the housing market,” Samyak urged.