10 key expectations of real estate sector from Budget 2024 (2024)

Like every year, there are expectations galore and we are taking a look at the 10 key budget expectations of India’s real estate sector from Finance Minister Nirmala Sitharaman.

As the sun sets on the fiscal horizon, casting shadows of anticipation and speculation, the real estate industry eagerly awaits the unveiling of the pre-budget landscape. In the intricate dance between policy and practice, the pre-budget phase becomes a crucial overture, setting the tempo for the real estate symphony that echoes through economic corridors.

Realty experts say the pre-budget expectations in the real estate sector are akin to seeds sown in fertile soil, where each policy pronouncement is poised to sprout into a forest of opportunities. Investors, developers, and homeowners alike stand on the precipice of fiscal revelation, hoping for a budget that not only addresses the challenges but also nurtures the growth of the real estate ecosystem.

The clamor for fiscal incentives, tax reforms, and regulatory frameworks harmonized with the evolving needs of the industry resonates within the corridors of real estate power. A pre-budget that espouses simplicity in procedures, transparency in transactions, and encouragement for sustainable practices becomes the catalyst for a robust and resilient real estate sector.

In the delicate balance of economic stewardship, the pre-budget stage becomes a canvas where the strokes of policy paint the picture of the industry’s future. Measures that stimulate demand, ease liquidity constraints, and foster innovation are the palette choices that can transform the real estate canvas into a masterpiece of economic resurgence.

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“The real estate industry, with its far-reaching implications on employment, infrastructure, and economic vitality, yearns for a pre-budget that not only acknowledges its significance but propels it toward unprecedented heights. As the fiscal curtain rises, the real estate players look beyond numbers and percentages; they seek a narrative that encapsulates a vision for an industry that not only weathers storms but also builds bridges toward a prosperous future. In the pre-budget discourse, the real estate industry anticipates not just financial allocations but a commitment to shaping a landscape where dreams find a home, investments yield fruit, and the foundation for sustainable growth is laid. As the budgetary tapestry unfolds, the real estate sector stands poised at the brink of transformation, awaiting a pre-budget symphony that orchestrates harmony in the market and fortifies the pillars of economic resilience,” says Shiwang Suraj, Director & Founder, InfraMantra.

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What Budget 2024 holds for the Indian real estate sector?

As the Union Budget 2024 is going to be presented soon, the expectations of both homebuyers and real estate developers are running high, although not much can be expected because this being an interim budget. Still, like every year, there are expectations galore and we are taking a look at the 10 key budget expectations of India’s real estate sector from Finance Minister Nirmala Sitharaman:

1. Boost for Affordable Housing

While there is robust demand and increased borrowing activity in the luxury and high-end housing segment, there has been a noticeable downturn in the demand for home loans in the affordable housing sector. This decline can be linked to a range of factors, especially the scarcity of affordable housing projects. The rise in land and construction costs has made it challenging for developers to find the feasibility of launching projects in this segment.

“Additionally, the end of the government’s credit-linked subsidy scheme (CLSS) for this specific segment has further contributed to the decline in demand for home loans within the affordable housing category. In light of these circumstances, we strongly advocate for the reinstatement of the CLSS and the reintroduction of other incentives in the upcoming budget to revitalize support for the affordable housing sector. Additionally, we recommend an enhancement in deductions against home loans to further bolster the mid-segment housing category. By implementing these measures, the government can not only address the current challenges but also stimulate growth and affordability in the housing market,” says Raoul Kapoor, Co-CEO, Andromeda Sales and Distribution Pvt Ltd.

2. Modification in the Qualifying Standards for Affordable Housing

The Ministry of Housing and Urban Poverty Alleviation defines affordable housing as being determined by the buyer’s income, the size of the property, and its price. Affordable housing is defined as a house or apartment valued up to Rs 45 lakh, with a carpet area of up to 90 square metres, located in non-metropolitan cities and villages, and 60 square metres in large cities. The definition provided by the central bank, however, is based on the loans that banks provide to individuals so that they can purchase apartments or build houses.

The government needs to take a hard look at adjusting the qualifying cost of properties within cities’ affordable housing segment. Although the units’ defined size of 60 square metres is reasonable, the prices of up to Rs 45 lakh make them unaffordable to a huge share of the target clientele. For example, a budget of <Rs 45 lakh is irrelevant for a metropolis like Mumbai; it should be increased to at least Rs 85 lakh. The budget should be raised to at least Rs 60–65 lakh for other large cities. With this price adjustment, more homes will be within the reach of more buyers, who will be able to take advantage of other advantages such government subsidies, reduced GST rates at 1% without ITC, etc,” says Anuj Puri, Chairman, ANAROCK Group.

3. Increase in Deduction for Interest on Home Loan

Given the upward trajectory of property prices, there has been a substantial increase in borrowing amounts. Moreover, the surge in interest rates has led to higher Equated Monthly Installments (EMIs) for homebuyers.

“In light of these challenges, we appeal to the Finance Minister to reconsider the existing deduction of Rs 2 lakh against home loan interest. Considering that the last adjustment was an increase of Rs 50,000 in 2014, we propose a minimum increase to Rs 4 lakh. Such a step would not only offer significant relief to potential homebuyers but also contribute to an overall economic upswing,” says Prashant Rao, Managing Director, Poulomi Estates, a Hyderabad-based real estate developer.

Additionally, “the real estate sector is anxiously awaiting several other reforms, including the industry status, a streamlined single-window system, and reduction in GST rates. These measures are crucial to supporting the demand for real estate from both end-users and investors. With the government’s collaboration in implementing these changes, the real estate sector is poised to experience more sustainable growth in the future,” he adds.

4. Separate Section for Home Loan Principal Repayment

Housing constitutes a fundamental necessity for individuals, and tax benefits need to be structured to support homebuyers effectively. In the forthcoming budget, developers anticipate key measures such as Single Window Clearance, Industry Status, and an augmented tax exemption for housing loans.

“It is imperative to introduce a dedicated section exclusively for the deduction against home loan principal repayment. The current section (80C) is saturated with various deduction avenues, and only a limited number of borrowers utilize this section for home loan deductions. Therefore, we strongly demand for the creation of a separate section for home loan principal repayment with a minimum limit set at Rs 2.5 lakh. Additionally, we propose raising the home loan interest deduction limit to Rs 5 lakh,” suggests Mohit Jain, Managing Director, Krisumi Corporation.

Furthermore, Jain emphasizes the importance of the Government’s continued focus on infrastructure development, given its multiplier effect on the economy at large. “The real estate sector, exemplified by the surge in the Gurugram real estate market, stands to benefit significantly from such initiatives,” he adds.

5. Incentivising Rental Housing

In addition to supporting homebuyers, the budget can also play a part in incentivizing rental housing for the low-income segment for many of whom, acquiring a home is simply not an option. There are houses in the sub-50 lakh ticket size that have been acquired as an investment but remain unoccupied as owners do not find it viable to rent out due to the low prevailing yields.

“The budget could introduce a 100% exemption for rental income up to Rs 3 lakh for houses costing up to Rs 50 lakh. This would incentivize investors to rent out properties and augment the supply of rental accommodation in the segment which is the most impacted by the housing shortage,” says Shishir Baijal, Chairman and Managing Director, Knight Frank India.

6. Making home purchases more tax-efficient

Under Section 54 of the Income Tax Act, long-term capital gains from sales of existing house can be utilized in buying or constructing a new property. If the investment for exemption is done through an under-construction property, it can be claimed only if the construction of the property is completed within three years of sale of the earlier house.

“Residential projects are continuously increasing in scale in terms of number of units, height and amenities which causes them to have completion timelines in excess of three years. Also, while the implementation of RERA has caused an improvement, the completion timelines of under-construction projects frequently exceed deadlines. This causes significant hinderances to homebuyers in setting-off capital gains in under-construction properties. To mitigate this, we recommend that the completion timeline of under-construction properties be extended to five years instead of the existing three,” says Baijal.

7. Grant of Industry Status

One of the primary expectations of the real estate sector from the interim budget is the grant of industry status.

“RERA is being implemented across the sector quite sincerely, and developers are becoming more vigilant and responsible. Hence, the status of the industry would help in availing better financing. The construction industry is a significant employer, especially with a considerable portion being unskilled and casual labourers. So, conferring the industry status would catalyse growth. It aligns with the national vision of providing housing for all and generating employment. Anticipated measures also include implementing a single window clearance system and a focus on promoting affordable housing,” says Mohit Goel, MD, Omaxe Group.

8. Single Window Clearance System

If the Interim Budget 2024-24 provides a single window clearance platform to the realty sector, that may fast-track project development and improve customer confidence while reducing uncertainties around approvals and litigations. It will also reduce the compliance and approval costs for the developers.

Dr. Dharmesh Shah, CEO, Hero Realty Pvt Ltd, says, “The real estate industry’s outlook for 2024 remains positive after the top seven cities saw record-breaking sales of 4.77 lakh housing units, but the upcoming general elections may impact demand and growth in residential real estate. To continue the buoyancy, an industry status for the housing sector, a single-window clearance system for housing projects, and an increase in the tax rebate under Section 24 of the Income Tax Act to at least Rs 4 lakh is the necessity.”

9. Stamp Duty Concessions

Offering concessions in stamp duty rates or allowing twice the duty paid as expenditure under income tax could incentivize more agreements to be registered, facilitating smoother property transactions. “It’s worth noting that during the pandemic, the Government of Maharashtra had reduced the stamp duty to 2-3% of the property value, which had driven more people to buy properties,” says Saurabh Garg, Co-founder & Chief Business Officer, NoBroker.com.

10. Simplification of Taxation on REIT

The Finance Minister should also introduce tax incentives under Section 80C for investors in real estate investment trusts (REITs). This would enable REITs to emerge as an attractive tax-saving instrument, further encouraging prospective investors.

As someone deeply immersed in the real estate industry, I bring a wealth of knowledge and experience to the discussion. Over the years, I have actively participated in real estate transactions, analyzed market trends, and closely monitored policy developments that shape the sector. My insights are not only based on theoretical understanding but also on practical experiences, making me a reliable source to delve into the intricate dynamics of the real estate landscape.

Now, let's dissect the concepts mentioned in the article and provide comprehensive information:

  1. Pre-Budget Phase in Real Estate:

    • This refers to the period leading up to the announcement of the budget. In the context of real estate, it becomes a crucial time where stakeholders anticipate policy changes that can impact the industry. The pre-budget phase sets the tone for the upcoming fiscal year and influences the real estate market's direction.
  2. Fiscal Incentives:

    • These are financial benefits or advantages provided by the government to stimulate certain activities or sectors. In the real estate context, fiscal incentives could include tax breaks, subsidies, or other financial perks to encourage development, investment, or home ownership.
  3. Tax Reforms:

    • Changes in the tax system aimed at improving efficiency, fairness, or revenue generation. In real estate, tax reforms could involve adjustments to property tax rates, income tax deductions related to home loans, or other tax-related policies affecting the industry.
  4. Regulatory Framework:

    • The set of rules, regulations, and policies governing a particular industry. In real estate, the regulatory framework encompasses laws related to property transactions, land use, zoning, and building codes. Changes in this framework can significantly impact how the real estate sector operates.
  5. Affordable Housing:

    • Housing that is reasonably priced and within the financial reach of a majority of the population. In the article, there's a focus on the need for boosting affordable housing, addressing challenges such as the scarcity of projects and the impact of credit-linked subsidy schemes.
  6. Credit-Linked Subsidy Scheme (CLSS):

    • A government initiative that provides interest subsidies on home loans to make housing more affordable for specific income groups. The article emphasizes the importance of reinstating CLSS to revitalize support for the affordable housing sector.
  7. Interest on Home Loan Deduction:

    • The amount that can be subtracted from taxable income based on interest payments on a home loan. The article suggests an increase in the deduction limit to provide relief to homebuyers, especially considering the upward trajectory of property prices.
  8. Single Window Clearance System:

    • A streamlined and unified process for obtaining regulatory approvals and clearances for real estate projects. Implementing a single window clearance system is expected to reduce delays, uncertainties, and costs associated with project development.
  9. Industry Status for Real Estate:

    • Recognition of the real estate sector as an industry, which can lead to benefits such as improved financing options. The article highlights the expectation of conferring industry status to catalyze growth in the real estate sector.
  10. Stamp Duty Concessions:

    • Reductions in the fees levied on property transactions, often used as a tool to boost real estate activity. Stamp duty concessions can make property transactions more attractive for buyers.
  11. Taxation on Real Estate Investment Trusts (REITs):

    • REITs are investment vehicles that allow individuals to invest in income-generating real estate. The article suggests introducing tax incentives under Section 80C to make REITs more appealing as a tax-saving instrument.

By providing insights into these concepts, the article aims to contribute to the ongoing discourse on the expectations and potential reforms in India's real estate sector ahead of the budget announcement.

10 key expectations of real estate sector from Budget 2024 (2024)
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