8 things the real estate sector is looking forward to from Budget 2024

8 things the real estate sector is looking forward to from Budget 2024

Budget 2024 will be presented by Finance Minister Nirmala Sitharaman today. The real estate sector has sought an expansion of the definition of affordable housing, industry status for the real estate sector, tax sops for homebuyers as well as developers, increase in exemption on principal amount as well as the interest paid on home loans, and greater retail engagement in Real Estate Investment Trust or REITs.

The real estate sector's wish list for Budget 2024 includes expansion of the definition of affordable housing, industry status for the real estate sector, tax sops for homebuyers as well as developers. (HT Photo)
The real estate sector’s wish list for Budget 2024 includes expansion of the definition of affordable housing, industry status for the real estate sector, tax sops for homebuyers as well as developers. (HT Photo)

It should be noted that Budget 2024 is a vote on account or an interim budget.

Catch the complete coverage of Budget 2024 only on HT. Explore now!

Tax exemptions

Confederation of Real Estate Developers’ Associations of India (CREDAI), has urged the government to increase tax exemption limit on principal amount as well as interest paid on home loans to boost demand for residential properties.

In its pre-Budget recommendations, it suggested that the deduction for principal repayment of housing loan should be considered for a separate or standalone exemption. CREDAI has sought deduction under section 80C for principal repayment of housing loan should be increased from the existing limit of 1.5 lakh.

Limit on tax deduction on interest paid should be increased from the current 2 lakhs to about 3-4 lakhs in case of self-occupied property. In case of let-out property, limits can be dropped entirely.

Also Read: Co-working firms want Budget 2024 to provide for ITC and allow green credits

“Homebuyers are anticipating increased tax benefits in the upcoming budget. One key expectation is to elevate the current 2 lakh tax rebate on housing loan interest under Section 24 of the Income Tax Act to a minimum of 5 lakh. This adjustment is crucial to bolster housing demand, especially within the affordable housing segment,” said Piyush Bothra, Co-Founder and CFO, Square Yards.

Increase the size of SWAMIH Fund to 50,000 crore

Despite the recent capital infusion of 5,000 crore, the overall size of the Special Window for Completion of Affordable and Mid-Income Housing Projects (SWAMIH) fund set up under the Special Window for Affordable and Mid-Income Housing should be raised to 50,000 crore to improve the housing market and ensure more delayed projects are completed, said real estate experts.

Changes in definition of affordable housing

The real estate sector has also recommended standardization and rationalization in the definition of affordable housing across government schemes and financial institutions can help homebuyers qualify for cheaper financing options in the particular category.

Also Read: Home loan interest subsidy scheme for urban areas in final stages: Puri

Credai noted that the definition of affordable housing, which was capped at 45 lakh, was given in 2017 and is yet to change since. It recommended that the definition of affordable housing be revised as “a unit with 90 square meter RERA carpet area in Metros Cities and 120 square meter RERA Carpet Area in Non-metros without a cap on cost of the unit”.

Potential measures could include tax breaks for developers focused on affordable housing, thereby encouraging increased supply to meet the rising demand in urban and rural areas. A 100% tax holiday for affordable housing projects under Section 80IBA should be reintroduced, it said.

Pradeep Aggarwal, founder and chairman of Signature Global (India) Ltd, said that the government should relaunch the CLSS scheme, expanding affordable housing criteria to 75 lakhs and increasing the carpet area to 90 square meters.

Enhance eligibility criteria for PMAY scheme

According to Knight Frank India, the share of sales in the less than 50 lakh housing units (affordable housing sales) segment has dropped steadily from 48% in 2018 to 30% in 2023. Even as overall housing sales go from strength to strength and stand at 10-year highs, affordable housing sales have dropped 16% YoY in 2023. Homebuyers in this segment are most impacted by affordability constraints in an inflationary scenario characterized by high interest rates and increasing residential prices.

“The PMAY scheme which provides for central subsidy is valid till December 2024. The scheme should be extended till December 2025 as it is currently the most potent tool that the government has, to support the affordability of homebuyers in the economically weaker sections. The eligibility criteria for homebuyers under the PMAY scheme restricts the interest subsidies in the range of 2.3 to 2.7 lakh. This criterion can be enhanced to support affordability,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

Increasing this will make the scheme more market aligned, considering increasing residential prices especially in urban India. This will serve to reduce the EMI burden of the homebuyer and enhance affordability. Additionally, it will also increase overall loan eligibility to further augment affordability, he added.

Grant infrastructure status to the real estate sector

The real estate sector also wants the government to grant it infrastructure’ status that will ensure easier access to institutional credit and help reduce developer’s cost of borrowing.

Greater retail engagement in REITs

The Union Budget 2024-25 should explore initiatives to boost greater retail engagement in REITs.

“REITs and InvITs have made a significant contribution to the growth of the real estate and infrastructure sectors. To further help these instruments grow, certain long-standing tax asks aligning these instruments with listed equity shares is imperative. The recent SEZ rule amendment is a progressive policy reform which will help REITs and other commercial real estate companies unlock vacant spaces in the IT/ITeS Parks, while adding to employment creation and boosting economic activity. An amendment to the CGST Act, enabling real estate players to avail input credit during the construction phase, will also help reducing costs and support the growth of this asset class,” said Ramesh Nair, CEO| Mindspace Business Parks REIT.

Incentives for senior living

In India, senior care services fall under the 18 percent slab of GST.

The real estate sector hopes that the Union Budget 2024 will announce senior care specific initiatives and investments. The $12-15 billion senior care market in India is set to increase to $40-50 billion by the end of this decade, and would require robust policy frameworks, financing mechanisms, expanded care capacity, and an elder-care ecosystem involving both the public and private sectors.

“The spending on non-prescription healthcare is estimated to reach around $ 5.33 trillion by FY25 and sustained investments in geriatric healthcare infrastructure, skilled workforce development and wellness services for seniors would ensure better quality and access for Indian consumers,” said Rajit Mehta, MD & CEO, Antara Senior Care.

Incentivize homebuyers for buying homes from RERA-registered projects

Homebuyers want to be incentivized for buying homes from RERA-registered projects. “This will encourage homebuyers to buy only into real estate projects that are registered with RERA and bring more builders under the ambit of the regulator,” said Abhay Upadhyay, the Forum for People’s Collective Efforts, a pan-India homebuyers’ body.

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