Union Budget 2024: Affordable Housing And Tax Reforms For Real Estate Among Expectations
Alongside PMAY, there are expectations of some other measures focused on revival of affordable housing.
As the Union Budget approaches, the real estate sector is brimming with expectations, especially in the wake of the recent general elections. With the government’s strong commitment to infrastructure development and housing in recent years, stakeholders are hopeful for a range of measures that could directly benefit homebuyers. The sector anticipates tax reliefs, higher budgetary allocations for key schemes, and incentives for affordable housing—all aimed at addressing key challenges and keeping the demand momentum going.
First on the list is a healthy budgetary allocation for the Pradhan Mantri Awas Yojana. With PMAY 1.0 nearing completion and around 85% of the target met as of June 2024, the recent announcement of the construction of an additional 3 crore houses under the scheme bodes well for those who couldn’t avail the benefits of the scheme earlier. The February vote-on-account had a healthy budgetary allocation of about Rs 75,000 crore for the PMAY. There are expectations of a higher budgetary allocation, given the announcement of an extension of the scheme.
Alongside PMAY, there are expectations of some other measures focused on the revival of affordable housing, which has lately been on a declining trend due to the shift in demand towards premium and luxury houses. Announcements of tax holidays for developers for affordable housing projects or some direct incentives for affordable homebuyers would be a welcome step. Currently, for a house to be classified as an affordable house, it should cost no more than Rs 45 lakh, which is quite low, particularly in tier-1 cities where property prices are high. An upward revision of this cap is expected, as it will improve coverage, particularly in tier-1 cities.
Next on the list is a second tranche of the Special Window for Affordable and Mid-Income Housing Investment Fund I, which has benefited scores of homebuyers and helped convert non-performing assets to performing assets.
Sponsored by the Ministry of Finance and managed by SBICAP Ventures Ltd., SWAMIH Investment Fund I was the country’s largest social-impact fund specifically formed for completing stressed and stalled residential projects in the affordable-housing and mid-income-housing categories.
In the four years since its inception in 2019, the fund has had an outstanding impact in terms of the completion of stalled projects. It was instrumental in delivering over 32,000 homes as of April 2024 and aims to complete more than 60,000 homes over the next three years across 30 tier-1 and 2 cities. A healthy budgetary allocation for the SWAMIH fund would be a good step towards achieving the target.
Third, developers expect an amendment to Section 23(5) of the Income Tax Act. Under this section, the unsold property of developers is considered stock-in-trade after two years from the date a completion certificate for a project is issued. The property is then assessed based on the property’s income, based on notional rent, which, developers say, puts an additional tax burden on it.
Developers are demanding either the abolition of the concept of notional income or an increase in the timeline by five years for considering notional income. Either of these measures will ease their tax burden to some extent and can help improve their profitability and financial health.
Finally, an increase in the home loan interest deduction allowed under Section 24 of the Income Tax Act is widely expected. Under the current regime, deductions from total income can be claimed for interest paid on home-loan EMIs of up to Rs 2 lakh maximum. An increase in this limit is widely expected, as it would provide substantial relief to home-loan borrowers who have had to shell out larger interest payments due to a comparatively higher repo rate regime.
Such a move will also increase public interest in homeownership due to improved affordability, thereby helping sustain the demand momentum. While the real estate sector has been flying high, with fiscal 2024 being touted as the potentially decadal best year for the sector by many stakeholders, homeownership remains a distant dream for many.
Aniket Dani is director, research at CRISIL Market Intelligence and Analytics.
The views expressed here are those of the author, and do not necessarily represent the views of NDTV Profit or its editorial team.
