2024 Budget Anticipates Tax Revisions and Eased Regulations to Boost Affordable

The real estate market eagerly awaits the 2024 budget announcements to revitalise affordable housing. In the interim budget presented in February earlier this year, Finance Minister Nirmala Sitharaman outlined the government’s plans to make homeownership more accessible and alleviate the middle class’s concerns. The budget included extensions of existing schemes and policy revisions designed to incentivise the market.

Luxury properties have consistently shown increased demand each quarter. However, affordable housing opportunities for the middle class remain stagnant and scarce. Industry experts hope for tax reliefs and an easier business environment in the forthcoming full budget.

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Expert Opinion

The interim budget announced on February 1 emphasised schemes to help those ‘living in rented accommodations, slums, chawls and unauthorised colonies.’ The PM Awas Yojana became a prominent pillar, with revamps like a five-year extension, revisions to the CLSS and a fund allocation increase of over 15%.

Experts, however, highlighted the need to go beyond just the scheme and incorporate various other factors. Amit Prakash Singh, co-founder and Chief Business Officer of Urban Money, remarked, “While the government’s focus on affordable housing under PMAY is commendable, recalibrating strategies in light of escalating construction costs is imperative for sustained inclusiveness and effectiveness.”

Industry professionals also raised several other expectations, including regulations promoting long-term rental housing and a more inclusive approach.

Tax Revisions

Industry insiders have emphasised the impact tax revisions could have on improving housing demand and countering price rises. There have also been recommendations to increase the home loan interest deduction limit from ₹1.5 lakh to a minimum of ₹4 lakh per annum.

Real estate firm Vestian’s CEO, Shrinivas Rao, commented, “Demand for residential units is expected to increase further if the government increases tax exemption limits for home loans.”

Real estate developer Navin’s Director, Navin Kumar, raised similar concerns. Stating, “Revisions in Section 24B of IT tax act – which provides the deductions in terms of money spent on interest payment of home loans – was set at 2 lakh rupees, in 2014. Inflation-adjusted, that number is significantly higher today. The same applies to 80C, set up in 2014.”

Sterling Developers’ Chairman and MD Ramani Sastri has suggested lowering the prevailing GST rates. “A moderate reduction in GST rates for the real estate sector would also make homes more affordable and spark demand. We also expect the maximum tax rate of 30 per cent to be reduced to improve the individual’s buying power”, he said. Manglam Group’s director Amrita Gupta also noted, “The reintroduction of GST with an input tax credit can catalyse construction activities by reducing the overall project costs, which ultimately benefits buyers.”

Easing Business Regulations

Additional efforts to facilitate the ease of doing business in India are necessary to ensure sustained market growth. Omaxe’s Managing Director Mohit Goel emphasises, “Addressing liquidity concerns, simplifying regulations, and introducing enhanced funding for affordable and mid-income housing are necessary to revive and promote sustainable growth.”

The Indian market is currently at its historical best. The second quarter of 2024 attracted investments totalling USD 2.77 billion, bringing the total for the first half of 2024 to a record-breaking USD 3.9 billion. This surge marked a 1.5x increase compared to the previous quarter and a 39% year-on-year growth. Despite these encouraging trends, investors and developers look forward to favourable business regulations, improved approval systems, and rapid digitisation.

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Published Date: 22 July, 2024