Real Estate Magazine

Pre-Budget Expectations of Real Estate Sector


Pune, 31st January 2024: The Interim Budget 2024 will be presented by Union Finance Minister Nirmala Sitharaman around 11 am on February 1, Thursday. The Union Budget 2024 will be an Interim Budget because Lok Sabha polls are slated to take place in the coming months and the full year Budget 2024 will be presented after the new government is elected.

The real estate sector has following expectations from the budget:

Ranjit Naiknavare, President, CREDAI Pune Metro:
Increasing Tax Exemptions – Principal repayment of housing loans should be increased from the existing limit of Rs 1,50,000. A separate or standalone exemption for the deduction for principal repayment of housing loans is recommended. All this is under section 80C of the Income Tax Act.

Re-defining affordable housing – The current definition of affordable housing is the one which was made in the year 2017. Due to inflation, there has been a significant rise in real estate prices in the past seven years. As per the National Housing Bank (NHB) data, there has been an increase of 24 per cent in housing rates since June 2018 in India. This makes the current cap of Rs 45 lacs for affordable housing extremely unfeasible for the real estate sector. Thus, CREDAI has requested for a revision in the definition of affordable housing. CREDAI recommends it as ‘A unit with 90 square meters RERA Carpet Area in Metros Cities and 120 square meters RERA Carpet Area in the non-metros without a cap on the cost of the housing unit. The 80IB benefits should be reintroduced to encourage developers to go for the creation of affordable housing.

A booster for India’s young population to commemorate the Amrit Kaal. Since a huge chunk of India’s population is below the age of 40 years and would become the first-time home buyers if an appropriate scheme is introduced for them to encourage home buying. It could be in the form of a re-introduction of the Credit Linked Subsidy Scheme for the ‘MIG’ segment.

Rahul Talele, Group CEO, Kolte-Patil Developers Ltd:
The upcoming interim budget remains pivotal, presenting a valuable opportunity to stimulate productivity, ease operations, and foster growth for the real-estate sector. At Kolte-Patil, we expect the government to support the current momentum by implementing initiatives that improve the affordability index like increasing the limit for tax deductions for home loan interest implementing the interest subvention scheme for urban housing. Given the prevailing price trends in some of the major metros, increasing the price limit for affordable housing will allow a larger base to benefit from government subsidies and reduced GST rates. Furthermore, the longstanding aspiration for infrastructure status remains, as it can facilitate developers’ access to cheaper capital enhancing project viability. In summary, spending on public infrastructure, GST rationalization, reducing repo rate, industry status, single window clearances, and tax breaks can serves as catalysts for the real estate sector that will elevate allied economic activities, benefitting the overall economy.

Ramesh Nair, CEO, Mindspace Business Parks REIT:
REITs and InvITs have made a significant contribution to the growth of the real estate and infrastructure sectors. To further help these instruments grow, certain long-standing tax asks aligning these instruments with listed equity shares is imperative. The recent SEZ rule amendment is a progressive policy reform which will help REITs and other commercial real estate companies unlock vacant spaces in the IT/ITeS Parks, while adding to employment creation and boosting economic activity. An amendment to the CGST Act, enabling real estate players to avail input credit during the construction phase, will also help reducing costs and support the growth of this asset class.

Venkatesh Gopalakrishnan, Director Group Promoter’s Office, MD & CEO – Shapoorji Pallonji Real Estate (SPRE):
As we approach 2024, the real estate sector is at a crucial point, anticipating opportunities beyond conventional boundaries. With signs of pre-pandemic stability, the industry is poised for sustained growth. While acknowledging the government’s efforts, we propose targeted measures in the upcoming Union Budget to unlock the sector’s full potential. We urge the government to consider our primary request, which is a significant increase in the home loan cap from Rs 2 lakhs to Rs 5 lakhs annually. This would not only incentivise homebuyers but also boost industry revenue. We advocate for a reduction in long-term capital gains tax, waiving notional rent on second properties, and aligning the income tax rate with corporate rates at around 25 per cent. In order to revive the sector, the government should focus on affordable housing. We propose to reduce GST rates and interest subventions for affordable housing. Single window clearance for the sector has been pending for a long time. We hope to see it granted in this year’s budget. Further, we support the industry-wide call for granting “industry status” to the residential sector, aligning with the government’s vision of “housing for all.” Additionally, supportive measures, including NAREDCO’s appeal for an INR 50,000 crore fund, will also align with the government’s vision of “housing for all” and could significantly fortify the sector’s trajectory. The budget is a chance to redefine affordability as the diverse locations demand different price caps instead of uniformity. Recognising changing investment dynamics, we suggest expanding Section 80C limits for millennials and Gen-Z homebuyers.

Sandeep Runwal, President, NAREDCO Maharashtra:
The real estate industry, a vital contributor to the economy and the second-largest employment generator, is poised on the brink of potentially transformative changes. The sector eagerly anticipates the 2024-25 budget announcements, which are expected to significantly influence its future.

In the previous year, the Central and State governments implemented a series of reforms and incentives to rejuvenate the economy. These efforts have been instrumental in sustaining the growth momentum of the real estate sector.

A major focal point for the Government continues to be affordable housing. We suggest an increase in the cap for interest rate deduction under section 24(b) from Rs. 2 lakh to Rs. 5 lakh per annum. Additionally, there’s a call to redefine the definition of affordable housing, proposing an increase in the cap from Rs. 45 lakh to Rs. 1 crore, particularly in metro cities. This change is expected to significantly boost both affordable and mid-segment housing.

The industry also anticipates the continuation of incentives for affordable rental housing schemes. Tax reliefs for such projects could accelerate investment and aid in achieving the Government’s ambitious ‘Housing for All’ goal. Further expectations include tax benefits for first-time homebuyers and the re-introduction of GST with an input tax credit on under-construction properties. These measures are anticipated to stimulate demand among homebuyers.

Other suggestions include tax reliefs to fuel significant growth in the real estate sector, single window clearance, and reduced home loan interest rates. The reintroduction of subvention schemes is also on the wish list, which would assist homebuyers in aligning their payments and encourage home buying decisions.

There’s a call for an increase in the SWAMIH stress fund and the creation of a second tranche with a corpus of ₹50,000, aimed at completing stalled realty projects and ensuring adequate liquidity.

A long-standing demand of the sector has been the granting of ‘industry status’ to real estate. This year, there is a hopeful anticipation that the Government will address this issue.

In summary, the real estate sector expects the Government to take decisive actions in the upcoming budget to fortify not only the real estate market but the entire economy. These measures should aim at addressing critical issues, ensuring job creation, and sustaining growth momentum.

Aditya Virwani, COO, Embassy Group:
A focus on infrastructure development, affordable housing, and ease of doing business during the upcoming Budget will be instrumental to shaping the sector’s trajectory.

Overall, we anticipate a strong emphasis on policy measures that encourage sustainable development, smart cities, and digitisation within the real estate landscape. A reduction in home loan interest rates and repo rates, coupled with special bank and EMI discounts, will be key to supporting continued growth. Recognising millennials as the driving force in the property market, revising the price cap for affordable and mid-segment homes can invigorate their homebuying spirit.

A hike in the tax rebate on home loan interest under Section 24 of the Income Tax Act, from Rs. 2 lakh to Rs. 5 lakh, will also catalyse housing demand. Additionally, tax breaks and a review of Goods and Services Tax (GST) rates will make affordable housing more accessible and enhance the financial viability of such projects. Considering Bengaluru as a Metro will offer higher HRA benefits to individuals as well as attract more talent to the city since there will be tax relief amidst the loan burden on house property.

Further, in alignment with the global shift towards sustainability, we look forward to incentives or subsidies for green building certifications and renewable energy installations in commercial real estate projects. We propose bringing REIT units in parity with listed equity. Reducing the holding period for long-term capital gain benefits from 36 months to 12 months would make REITs more attractive to investors. For SEZs, we are seeking simplified compliance through a single window clearance system, concessional tax rates or tax breaks for both developers and SEZ units, and to ease the denotification process. This would streamline processes, making SEZs more attractive for investment.

Our expectations align with the national agenda for economic revival, and we look forward to policies that foster a conducive environment for both domestic and foreign investments.

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