Unlocking Affordable Housing: Budget 2024's Pivotal Role

As the nation eagerly awaits Finance Minister Nirmala Sitharaman's Budget 2024 presentation, the real estate sector is hopeful that the government will prioritize affordable and middle-income housing. The sector has put forth a comprehensive set of recommendations, seeking tax sops for homebuyers, incentives for developers, and a revamp of the affordable housing criteria to make it more inclusive and accessible.

Empowering Homebuyers and Builders: A Dual-Pronged Approach

Expanding Tax Deductions for Homebuyers

The real estate industry has advocated for an increase in the deduction limit for interest payments on home loans, from the current ₹2 lakh per year to ₹5 lakh. This move, if implemented, would provide a significant boost to housing demand by enhancing affordability for homebuyers. Additionally, the industry has sought the revival of the Credit-Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY), which had previously incentivized first-time buyers of affordable homes.

Incentivizing Developers to Build Affordable Homes

To encourage developers to focus on affordable housing projects, the industry has proposed the reintroduction of the '100% Tax Holiday' benefit under Section 80-IBA of the Finance Act, 2016. This tax relief on the profits earned from developing and building affordable housing projects could significantly boost the supply of such units. Additionally, the industry has requested the option for builders to pay Goods and Services Tax (GST) at a concessional rate without input tax credit (ITC) or at a higher rate with ITC, which could result in tax cost savings and improved cash flows.

Redefining Affordable Housing Criteria

The current definition of affordable housing, based on property size, price, and buyers' income, has been a subject of debate. The industry has urged the government to reconsider the pricing of homes within the affordable housing budget, taking into account city-specific market dynamics. For instance, in a city like Mumbai, the current ₹45 lakh price cap is deemed inadequate, and the industry has suggested increasing it to at least ₹85 lakh. Similar revisions are sought for other major cities, where the budget should be increased to at least ₹60-65 lakh. This would enable more homes to qualify for the affordable price tag, allowing a larger segment of the lower and middle-income population to avail of the associated benefits.

Leveraging Government Land Parcels

The industry has also proposed that the government unlock its unused or sub-optimally used land parcels, such as those belonging to Port Trusts, railways, and defense establishments, and partner with credible private developers to build affordable housing projects. This approach would not only reduce development risk but also leverage the private sector's operational efficiencies, ultimately benefiting the end-users.

Granting Infrastructure Status to the Real Estate Sector

The real estate industry has long advocated for the granting of infrastructure status, which could significantly ease access to institutional credit and reduce borrowing costs for developers. With the sector expected to contribute 13-15% of India's GDP by 2030, this move could foster growth, attract investments, and ultimately benefit homebuyers through more affordable housing options.

Streamlining Approvals and Land Acquisition

The industry has also urged the government to provide a comprehensive framework for changes in land usage, aimed at fast-tracking development and making land acquisition smoother. This would help address the challenges faced by developers in navigating the complex regulatory landscape, ultimately leading to more efficient and timely project completion.As the government deliberates on the priorities for Budget 2024, the real estate sector's recommendations hold the potential to unlock the true potential of the affordable housing segment. By addressing the needs of both homebuyers and developers, the budget can pave the way for a more inclusive and vibrant real estate ecosystem, catering to the diverse housing aspirations of India's growing population.