Realty segment expectations from Budget 2024-25

In the last few years, India has shown tremendous progress in infrastructure. Better road, rail, and air network has made remote areas in the country accessible for everyone, enabling the real estate growth in Tier-II and Tier-III cities. Today, the realty sector has grown in areas that were once ignored due to poor connectivity.

The Union Budget 2024-25 is expected to be tabled in Parliament on July 23 or July 24. The second-largest employer in India after agriculture, the real estate segment is ready with its wish list for Budget 2024-25. Let’s know the expectations of the industry leaders from Budget 2024-25.

Affordable housing

In recent times, the affordable segment has seen a decline in overall sales. Rise in home loan interest rates could be one of the reasons behind it, which has impacted homebuyers and the sector. While the good news is that the Modi 3.0 government has approved the construction of over 3 Cr houses under the Pradhan Mantri Awas Yojana (PMAY), but the segment needs more incentives to bounce back. 

Rakesh Reddy, Director of Aparna Constructions, said” The upcoming Union Budget 2024-25 presents a crucial opportunity for the Indian real estate sector to introduce essential policy reforms aimed at driving growth and fostering development, particularly within the affordable and luxury housing segments. Ample policy support is essential to bolster demand and enhance overall affordability. Furthermore, key expectations such as gaining infrastructure status, streamlined approval processes, improved access to funding, and rationalization of GST must be addressed. It is imperative to implement policies that increase tax benefits for housing loans, reduce long-term capital gains tax on real estate investments, and extend the reach of affordable housing initiatives. Rationalising GST to reduce expenses and easing FDI regulations to attract foreign capital are essential steps to improve accessibility and boost growth in the luxury segment. With the real estate sector contributing 8% to India’s GDP, stakeholders are eagerly awaiting policy changes that would foster increased investments from both domestic and international sources.

The real estate industry is currently exploring strategies to promote greater accessibility to homeownership for a broader segment of the population, while also supporting the interests of developers. We are proposing an increase in the ceiling on home loan interest deductions to incentivise potential homebuyers. The proposal to raise the limit from Rs 2 lakh to Rs 5 lakh is projected to have a positive impact on middle-income buyers and drive demand within the market. Furthermore, efforts are being made to reassess affordability housing limits under the Pradhan Mantri Awas Yojana (PMAY) to more accurately align with the varying market dynamics observed across different cities.”

Price bracket

According to Dhruv Agarwala, Group CEO, Housing.com and PropTiger.com, “Demand and supply for affordable homes have shown fluctuating trends over the last three years across major Tier-I and Tier-II cities. In response, the upcoming Budget should focus on revitalising both demand and supply for homes in the Rs 15-75 Lakh per unit price bracket. Introducing interest subsidy programs could incentivise potential homebuyers effectively. Also, the state governments should be motivated to reduce stamp duty on affordable housing to make them more accessible.”

Extensive land banks

Agarwala further said, “To boost supply, the government could strategically deploy its extensive land banks in partnership with private developers, offering land and capital at concessional rates. Implementing tax incentives for developers, engaging in these affordable projects could further stimulate activity in this sector. It’s noteworthy that substantial demand persists within the Rs 15-75 Lakh price category, necessitating focused governmental action in the upcoming Budget. This approach would not only catalyse growth in the real estate sector but also stimulate approximately 200 ancillary industries, substantially boosting job creation across the sector. 

To address the issue of land shortage in metropolitan and semi-metropolitan cities and make housing more affordable, Dharmendra Raichura, VP Finance, Ashar Group said that the government should consider releasing government-owned lands at reduced rates. “This includes land owned by entities, such as the Indian Railways and Port Trusts. This strategic initiative is expected to significantly contribute towards lowering the overall real estate prices,” said Raichura.

Income tax exemption

One of the measures that would improve housing accessibility is affordability and this can be attained by taking steps toward tax exemption. Raichura said, “To increase tax exemption limits on both the principal and interest paid on home loans could be one step in this direction. Further, providing tax incentives for developers focusing on affordable housing could stimulate supply to meet the growing demand in both urban and rural areas. Reintroducing a 100% tax holiday for affordable housing projects under Section-80IBA is also recommended.” 

Also, the government’s commitment for creating world-class infrastructure for sustainable living will attract Foreign Direct Investment, reflecting confidence among NRIs to invest in luxurious properties. “To further boost investment, we suggest reducing long-term capital gains taxes on property and streamlining REITs coupled with increasing the limit of interest rebate for housing loans. Further, the implementation of modern regulatory framework and the Urban Governance Curriculum will positively impact the real estate sector. The substantial growth of the real estate sector requires increased manpower. Hence, the other suggestion includes further investments in upskilling to ensure seamless and on-time delivery while maintaining the quality standards of the projects,” added Sandeep Runwal, Managing Director, Runwal.

Kalyan Chakrabarti, CEO, Emaar India, said,”A positive and development centric interim budget highlighting commitment to infrastructure as a key driver of economic growth, coupled with the emphasis on modernization and indigenization, laid the foundations for fostering growth and resilience in the economy. The interim budget laid a roadmap for sustainable development by 2047 with the theme of ‘Viksit Bharat’. As we await the upcoming union budget, we are optimistic that it shall be akin to the interim budget auguring growth and development. We continue to seek an industry status for the real estate sector, which would represent a significant stride on the infrastructure front by the government. This move would enable developers to lower borrowing costs and pass on the benefits to the customers. As key stakeholders in the sector, one of our primary expectations is a reduction on GST rates on construction materials to enhance affordability and make home-buying more accessible. We expect policies that will promote financial inclusivity and incentivisation, such as reforms in taxation and financial accessibility. Additionally, optimising the process of land acquisition and registration of properties to make it more transparent and efficient, further encouraging development and investment in the sector. We are hopeful that the budget will positively contribute to the real estate sector’s mission of inclusive growth, sustainable development, and job creation in the coming years.”

Addressing liquidity issues

“We expect the budget to introduce measures that ensure easier access to financing for developers, especially Small and Medium-Sized Enterprises (SMEs). Enhancing the flow of money through banking and non-banking financial institutions is essential for sustaining project momentum. Also, there’s a need for an increase in the SWAMIH stress fund and the creation of a second tranche with a corpus of Rs 50,000 Cr, aimed at completing stalled realty projects and ensuring adequate liquidity,” said Prashant Sharma, President, NAREDCO Maharashtra.

Single window clearance

The introduction of single window clearance system for all real estate projects would streamline the approval process, reducing delay and cost. “This measure would accelerate project completion and enhance the ease of doing business in the sector,” said Sharma.

Industry status for real estate sector

With the Real Estate (Regulation and Development) Act (RERA) implemented across most states in India, the next logical step for the segment is to be awarded industry status. “Granting infrastructure status to the real estate sector will facilitate easier access to funding 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 overall economic growth,” said Chivukula.

REITs

Ramesh Nair, CEO, Mindspace Business Parks REIT, said, “Maintaining investor confidence in REITs with a stable tax framework is crucial as REITs play a pivotal role in boosting real estate, stimulating economic growth, and creating jobs. To attract more investments, the government should implement key reforms such as reducing the holding period for units from 36 to 12 months, classifying REITs as equity instruments to enhance liquidity, and allowing Input Tax Credit under the GST Act for construction procurements to lower costs. These reforms are essential as India strives for accelerated urbanisation to support sustainable growth, faster industrialisation to drive economic development, and better infrastructure to facilitate smoother urban expansion. The Indian REITs Association has formally proposed these measures to the Ministry of Finance to ensure stability, foster growth, and amplify the appeal of REIT investments.”

Housing.com POV

The Indian real estate sector is awaiting favourable budgetary support from the Union Budget 2024. The segment, which has been positively impacted by the implementation of RERA, looks forward for the implementation of the single-window system. After the infrastructure status awarded to affordable housing segment, it is now time for the real estate sector to be awarded with industry status as it would further help the sector to contribute towards India’s rising GDP.