Budget 2024: Realty sector awaits stimulus to boost affordable housing

Bengaluru: Following a boom year in 2023, the real estate sector in India has tempered its expectations from the interim budget 2024, to be presented by finance minister Nirmala Sitharaman on February 1.

The sector is asking for more sops to boost the one segment which did not do well last year – affordable housing.

“If you pick up any reports for the housing sector, they will demonstrate how the market is doing really well. Government also makes this assessment and where the sector is doing well, at least from the fiscal side (direct monetary support), we shouldn’t be expecting much,” Vivek Rathi, who heads research at property consultancy Knight Frank India, explained.

The National Council on Real Estate, Housing and Urban Development under ASSOCHAM is set to make a list of recommendations to the Ministry of Finance this week, the industry body’s chairman Pradeep Agarwal told DH.

Some of the measures that will find a place on the list include the demand of industry status for the sector, single window clearance to expedite execution of realty projects, revision in GST rules to allow input tax credit for all construction materials, reduction in stamp duty for property registrations and expansion of the affordable housing bracket to include units costing up to Rs 75 lakh, besides others.

Amid rising disposable incomes and a robust economy, the real estate market saw an unprecedented surge last year, especially the larger residential segment with home sales and launches registering record numbers. Several projects in the luxury housing bracket - estimated at thousands of crores - sold out within days of their launch.

However, one concern that came to the fore is the declining share of affordable housing. At 18%, the budget housing segment occupied the smallest share in the overall pie of housing supply in the top-7 markets, data from property consultant Anarock showed. Furthermore, sales of budget homes plummeted to 20% in 2023 from over 30% in 2022, and nearly 40% in the period before the Covid-19 pandemic.

Consequently, stakeholders are keenly eyeing the interim budget with strong expectations surrounding fiscal support for beneficiaries, and a rise in outlays, for the Pradhan Mantri Awas Yojana, both urban and rural.

Those like Vimal Nadar, who heads research at real estate consultancy Colliers, are also optimistic about additional provisions such as reintroduction of a tax holiday for development of low-cost housing projects, fresh tax exemptions for first time buyers of budget homes, expansion in the definition of affordable housing and so on.

The central government has stated that it constructed homes for over 4 crore impoverished households since coming to power in 2014. However, according to data available in the public domain, there still exists a shortage of 3 crore-plus housing units across rural and urban India. Furthermore, the completion timeline for PMAY, which seeks to provide ‘housing for all’, was extended from 2022 to December, 2024.

Beyond housing, the sectoral wish list includes measures to incentivise sustainable construction, development of electric vehicle infrastructure in residential areas, rationalisation in GST rates levied on key raw materials like cement, steel and aluminum, digitisation of land records, expansion in section 80C limits under the Income Tax Act and reduction in long-term capital gains tax.