By Akash Pharande, Managing Director – Pharande Spaces
As the Union Budget for 2024-2025 approaches, India’s real estate sector, especially the housing segment, faces a crucial moment. Balancing the positive trends of 2023 with global economic challenges and the stagnation in affordable housing, the sector looks towards key considerations in the upcoming budget.
Despite being an interim budget, usually seen as a temporary measure before a comprehensive post-general elections budget, it provides an opportunity to address immediate concerns and lay the foundation for future policies.
While traditionally an interim budget is considered a short-term solution, primarily in election years, it can also serve as a platform for the current government to outline its vision and initiate policy directions for the future.
Real estate stakeholders are optimistic about the potential for introducing critical reforms or support measures in this interim budget, even if they may be fully elaborated upon in the subsequent full-fledged budget.
1. Addressing the Affordable Housing Challenge:
- Enhanced budget allocations for existing affordable housing schemes.
- Streamlining approvals and clearances for affordable housing projects to expedite development.
- Tax incentives for developers focusing on affordable housing segments.
2. Tackling Funding Issues:
- Measures to ease liquidity for real estate projects, potentially through dedicated funds or special windows under institutions like the National Housing Bank (NHB).
- Reforms or relaxations in external commercial borrowing (ECB) norms to attract more foreign capital in real estate.
- Strengthening REITs (Real Estate Investment Trusts) framework to attract more investment.
3. Taxation Reforms:
- Rationalization of GST rates on real estate projects, addressing complexities and concerns, especially related to input tax credit.
- Rationalizing GST rates for raw materials used in affordable housing or providing input tax credit benefits to reduce construction costs.
- Additional tax deductions for homebuyers, particularly in the affordable and mid-income segments.
- Incentives for sustainable and green building practices through tax rebates.
- Providing tax deductions for those offering rental properties in the affordable segment to promote rental housing.
4. Regulatory and Policy Reforms:
- Streamlining RERA (Real Estate Regulation Act) across states for uniformity and better compliance.
- Policies promoting rental housing as a viable option, critical for urban areas with migrant populations.
- Clarity and support for digitization in land records and transactions.
5. Focus on Infrastructure and Urban Development:
- Increased spending on infrastructure, particularly in tier 2 and tier 3 cities.
- Policies integrating urban development with transportation, like Transit-Oriented Development (TOD).
6. Encourage Foreign Direct Investment (FDI):
- Relax FDI norms in certain real estate segments.
- Provide clarity and stability in policies to build investor confidence.
7. Boost Sustainable Development:
- Incentives for projects adhering to green building norms.
- Support for innovation in sustainable materials and construction technologies.
8. Support Technology Adoption:
- Incentives for adopting technology in construction and property management.
- Support for PropTech startups through funding and policy initiatives.
In this array of imperatives, the immediate upliftment of affordable housing stands out as a critical need. The government’s ambitious “Housing for All” target sets high expectations, making this interim budget a crucial juncture to pave the way for a robust comeback in this vital segment.