Budget 2024: Real estate pins hope on tax concessions, sops

The real estate sector is pinning its hopes on the 2024 budget from Modi's third term to ease several of the bottlenecks. With the Indian housing market being upbeat as sales hit nearly 4.9 lakh units in FY24, the industry is hoping its long standing demand of industry status for the entire housing sector and impactful measures being taken by the government to revive the affordable housing sector which has seen a decline in launches.

ANAROCK Research points out the share of affordable housing in home sales has reduced after COVID-19 from over 26% in 2022 and over 38% in 2019 to approx. 20% in Q1 2024. Supply share in the over all top 7 cities also fell to 18% in Q1 2024, from nearly 40% in 2019. Anuj Puri, chairman – ANAROCK Group, says re-introduction of 100% tax holiday for Affordable Housing Developers could help in a big way. The ‘100% Tax Holiday’ benefit that developers previously enjoyed under section 80-IBA in the Finance Act, 2016 provided for tax relief on profits earned from developing and building affordable housing projects. The definition of Affordable Housing needs to be also changed. “The government must seriously reconsider revising the pricing of homes within the affordable housing budget, taking into consideration city-specific market dynamics. As per the current definition, the size of units at 60 sq. m. carpet area is appropriate. However, prices of units (up to ₹45 lakh) are not viable across most cities," Puri says.

Developers also feel that instead of a pricing cap, a floor size ceiling would help in boosting the affordable segment and increase supply. Dhaval Ajmera, director, Ajmera Realty & Infra India Ltd, says that there should be a tax SOP dedicated to affordable housing and the definition of affordable housing by the RBI and RERA should perhaps look at home sizes from 60 sq.m to 90 sq.m rather than the current price bracket of 45 lakh.” The real estate sector is witnessing landmark growth and a developer & homebuyer-friendly budget will further amplify this sentiment,” he says.

The other long standing demand of the industry has also been giving it the infrastructure status. Industry experts say that this would not just enable the developers to access low cost funds but also help in improving the overall project viability. Badal Yagnik, Chief Executive Officer, Colliers India, says the government’s focus on infrastructure will be critical for the the real estate sector as well. “With the real estate sector expected to contribute 13-15% of the Indian GDP by 2030, stakeholders are hopeful for grant of ‘infrastructure’ status, a long-standing demand. This could significantly ease access to institutional credit and reduce borrowing costs for developers, fostering growth and investments,” he says.

The real estate sector is also hoping for the government to increase the tax deductions for housing loans , which it believes will go a big way in boosting the sentiment. Measures like higher deduction for housing loan principal under Section 80C which is currently capped at ₹150,000, Increasing the limit of interest paid on self-owned properties and extension of tax benefits under 80EEA could be big drivers. Punit Shah, partner, Dhruva Advisors, says that increasing the interest deduction limit on home loans will make housing loans more attractive to both potential buyers and investors. If the also capital gains exemption amounts (which is currently capped at ₹10 crore) is also increased , these measures could stimulate demand in the housing market, providing a much-needed boost to real estate developers and contributing to the overall growth of the sector.

While the tax sops can help in boosting the housing sector Prashant Sharma, president, NAREDCO Maharashtra, says that the government also needs to address the liquidity issue and an announce measures for easier access to financing and expanding the SWAMIH stress fund is also crucial for the sector. Kamal Khetan, chairman and MD of Sunteck Realty Ltd, also bats for the Government of India to consider lowering GST rates to increase demand for under-construction developments. “Additionally, reintroducing Input Credits would help developers reduce the tax burden and in turn benefit the customers, which further would also ensure a good supply of residential developments,” he says. With signs of controlled inflation, and a good monsoon providing for better headroom for growth, Samantak Das, chief economist and head – Research and REIS, India, JLL, says that measures like allowing 100% FDI in Completed Residential Projects which can facilitate in the capital investments required for the growth of the residential real estate sector through the automatic route and granting full ‘Industry’ status to the real estate sector given its multi-sector impact and potential for significant employment generation could fuel investments and holistic sector development and help in unlocking funds for higher growth.