Real estate sector pins hope on reforms and incentives

In India’s socio-economic landscape, the real estate sector has consistently proven to be a key pillar of strength and growth. While the country has faced global storms and domestic challenges in recent years, this resilient industry has stood tall, not only surviving but thriving.

The sector has played a key role in driving economic progress, creating jobs, shaping urban development and laying the foundation for India’s growth.

The industry has seen strong expansion in the past year, with the residential real estate market growing 48% year-on-year. Apartment sales and new launches have surged, with a particular focus on the mid-range and high-end segments.

Transactions in the commercial segment also doubled over the year.

Read also:Union Budget 2024: Real Estate Industry’s Wish List

When we look at the sector’s recent performance and its impact on the wider economy, it becomes clear why the property market requires our attention and support.

It continues to be a driving force behind India’s economic growth, actively building the nation’s path to prosperity. However, there are also ongoing challenges that continue to hinder the sector’s full potential.

Issues such as liquidity constraints, complex regulatory frameworks and the need for infrastructure upgrades remain at the forefront of industry concerns. The affordable housing segment has seen a slowdown, underscoring the need for targeted policy interventions.

As the 2024 budget approaches, industry representatives expect the government to take policy actions that address the specific needs of the industry and steer the sector towards sustainable growth.

While the government has increased budget funding for infrastructure modernization, maintaining this growth requires taking several key steps.

The real estate industry’s wish list is long – from potential tax reforms and infrastructure investments to measures to make doing business easier and promote sustainable development.

Let’s try to better understand the expectations of the industry and the key role that policy reforms can play in shaping the trajectory of this important sector.

Key expectations

Home Buyers Tax Relief: Industry experts have been arguing for increasing the limit for deduction of mortgage interest under Section 24 of the Income Tax Act, which is currently a maximum of ₹ 2 lakh per annum.

In addition, there are expectations of reintroduction of a separate section for repayment of capital on mortgage loans, which was earlier available under section 80C but is now combined with other investments. In addition, income tax on residential rental properties should be abolished for three years to promote housing and make returns attractive.

Tax Reduction: From land acquisition and joint development agreements to construction, completion and eventual sale, the cumulative tax burden on both the central and state governments can be overwhelming. A key proposal is to implement a cap on the total tax burden, ensuring that it does not exceed 45% to 50%.

Housing Industry Status: This could make it easier for developers to access finance, lower borrowing costs and attract more investment to the sector.

Green building initiatives: As the focus on sustainability grows, the real estate sector is looking to incentivize green building practices. This could include tax breaks for developers who implement eco-friendly technologies, subsidies for green building materials and incentives for homebuyers who opt for certified green homes.

Ease of doing business: This includes streamlining approval processes, reducing the number of permits required and potentially introducing an anonymous, single approval system for real estate projects across the country.

Support for projects at risk: This could include expanding the government’s SWAMIH (Special Window for Affordable and Moderate Income Housing) investment fund or introducing new mechanisms to complete stalled projects, which would benefit all stakeholders.

GST Rationalization: The Goods and Services Tax (GST) regime continues to be a subject of discussion in the real estate sector. There are hopes for further rationalization of GST rates, especially for under-construction properties.

Revitalizing affordable housing initiatives: The Budget should include the restoration of incentives like the Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY).

Moreover, providing 100% tax breaks for developers could significantly attract more investments to this segment.

(Sanjay Dutt is Managing Director & CEO, TATA Realty & Infrastructure Ltd.)