Interim Budget 2024: Realty expects futuristic reforms and more

Just like every year, India’s real estate sector has several expectations from finance minister Nirmala Sitharaman’s Interim Budget 2024. Housing News captures the essence of this long list of expectations in this article.

Expectation 1: Increasing tax benefits and the much-awaited industry status

The demand to grant the industry status to the realty sector is not new. Every year, stakeholders bring it back to their demand list to draw the attention of the government.

“As we chart our course towards achieving the $1 trillion revenue forecast for the industry in 2030 and aim for a 13% contribution to India’s GDP by 2025, the real estate sector emerges as a crucial chapter in our economic narrative. It’s essential to adopt a comprehensive approach that extends beyond promoting affordable housing to also addressing fundamental challenges. This includes granting Industry status and implementing a streamlined single-window clearance system”, says Dhruv Agarwala, group CEO, Housing.com, Proptiger.com and Makaan.com

Agarwala adds, “In response to the recent escalation in realty prices, we propose an increase in the tax rebate on home loan interest under Section 24 of the Income Tax Act. Raising the current limit from Rs 2 lakh to Rs 4 lakh could be a game-changer, helping to sustain the current strength in demand.”

Experts point out that tax deduction benefits available on the home loan are not sufficient. With the rise in property prices and an increase in loan ticket size, home buyers require greater tax deduction benefits on home loans.

Expectation 2: Boost for demand and supply

There is a unanimous consensus among the government, the sector and buyers that the cost of property needs to be within an affordable range and for that, the cost of the input material also needs to remain stable.

“The real estate sector often grapples with complex tax structures, impacting both developers and homebuyers. Expectations include a re-evaluation of the Goods and Services Tax (GST) rates on under-construction properties and raw materials to improve affordability. With the government’s ambitious Badal Yagnik, CEO, Colliers India pointed out, the “Housing for All” initiative at its final leg, there is widespread hope for targeted incentives and subsidies to boost affordable housing projects. 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. Furthermore, increased annual allocation for PMAY schemes, always proves to spurt demand in the affordable housing segment. Key expectations include the following:

*GST reduction on key raw materials such as cement, steel and aluminium will help in controlling project costs.

*100% tax holiday for affordable housing projects under Section 80IBA to be re-introduced.

*Increased fund allotment through the SWAMIH fund for improving liquidity in stressed residential projects.

Tax reform such as greater tax deduction benefits to home buyers can directly impact the demand side of the realty sector. Apart from tax reform, a lot more needs to be done to boost the demand in the realty sector. According to Colliers India, here’s a list of key expectations for boosting the demand side of the realty sector,

*Separate and higher deduction for housing loan principal repayment, currently capped at INR 150,000 under section 80C.

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

*Interest exemptions under Section 80EEA and 80EE (applicable for first-time homebuyers in affordable housing) can be increased from the current capping of Rs 150,000 and Rs 50,000, respectively.

*Reintroduction of tax exemptions for first-time homebuyers especially in the affordable segment.

*Standardisation and rationalisation of the “Affordable Housing” definition across government schemes and financial institutions can help homebuyers qualify for cheaper financing options in a particular category.

Expectation 3: Incentives for green initiatives

There is a huge effort put in by the government of India to boost green technology adoption and gradually reduce carbon emissions to meet its committed goal of net zero by 2070. The realty sector has also taken up the challenge to align with the country’s net zero commitment. However, for broader participation, it requires government support and incentives.

“There is a strong emphasis on increasing investments in both green infrastructures, like renewable energy, and traditional infrastructure, such as roads, railways, and ports. These investments are seen as crucial for the growth of both the real estate sector and the overall economy,” says Rohan Khatau, director, CCI Projects.

Other expectations

Experts believe that the government should take a futuristic approach by allowing greater tax incentives for the developers acquiring the green certification for their projects and at the same time the buyers in such projects should get loans at a discounted rate of interest. REITs have gained popularity in the last few years but a tax exemption would help it gain greater thrust among the investors. Land record digitisation and single window clearances for setting up new businesses are some of the long-standing demands that also require the government’s attention.