Real Estate Sector Pins Hopes on Modi 3.0: Focus on Infra Development and Affordable Housing

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    NEW DELHI — The real estate sector is optimistic that Prime Minister Narendra Modi’s third term will bring a renewed focus on infrastructure development, affordable housing, regulatory streamlining, single-window clearance mechanisms, and tax rationalization to stimulate investment and growth,as published in Hindustantimes With the formation of the new government, there lies a unique opportunity to propel the sector forward, addressing key challenges and fostering growth across various segments.

    Continuing Focus on Infra Development and Affordable Housing

    With Narendra Modi taking oath as Prime Minister for the third consecutive time, the real estate sector hopes the new government will continue prioritizing infrastructure development and affordable housing. Niranjan Hiranandani, chairman of Naredco National, emphasizes the need to revive affordable housing to overcome growth retardation in that segment.

    Boosting the PMAY Scheme

    Industry leaders welcome the new government and urge a focus on the Pradhan Mantri Awas Yojana (PMAY) scheme to achieve housing goals efficiently. Emphasizing the importance of affordable housing, Hiranandani said efforts should be directed towards reviving this critical segment to stimulate growth.

    Reducing Approval Costs and Rationalizing Taxes

    The real estate sector is pushing for reduced costs of approvals, development premiums, stamp duty, and ready-reckoner rates. Rationalizing taxes and GST is seen as essential to accentuate growth. Fiscal incentives for adopting construction technology and sustainable development are also recommended, along with outlining land and approval financing methodologies to aid timely project completion.

    Revisiting Affordable Housing Definitions

    Anshuman Magazine, Chairman and CEO of CBRE India, South-East Asia, Middle East & Africa, suggests revisiting the definitions of affordable housing. Given the substantial changes in construction costs, including raw materials, labor, and overall development, it is necessary to reassess the price, size, and income criteria to ensure the program remains inclusive and effective.

    Increasing Sales in Mid-End and High-End Segments

    The interim budget indicated that with unchanged government policies, the mid-segment housing sector would see targeted action and policy alignment. The mid-end (homes priced ₹40 lakh to ₹80 lakh) and high-end (homes priced ₹80 lakh to ₹1.5 crore) segments recorded sales of 76,555 units in Q1 2024, accounting for nearly 59% of the total, compared to 47% in Q1 2019.

    Addressing Decline in Affordable Housing Supply

    Anuj Puri, chairman of Anarock Group, notes that affordable housing (homes priced under ₹40 lakh) sales in Q1 2024 recorded 26,545 units, just 20% of total sales. The supply in this segment also dropped from 44% in Q1 2019 to 18% in Q1 2024. Making affordable housing more accessible by adjusting financial limits and providing incentives for builders is critical for the sector’s progress, said NAREDCO National President G Hari Babu.

    Reducing Home Loan Rates

    The increase in home loan interest rates from 6.25% pre-COVID-19 to around 8.75% today has made EMIs very expensive, particularly for middle-class families. The sector urges the government to provide relief by offering lower interest rates for affordable housing loans, potentially setting the first ₹20 lakh or ₹25 lakh of a home loan at a 5% interest rate for the first five years.

    Raising Financial Limits for Affordable Housing

    The real estate sector calls for raising the ₹45 lakh limit to ₹60 lakh to address challenges faced by builders and buyers. This adjustment would reflect the significant increase in land costs over the past seven to eight years, making it more feasible for builders to construct affordable homes and for buyers to purchase them.

    Strict Enforcement of RERA

    Amit Goyal, managing director of India Sotheby’s International Realty, highlights the need for stricter enforcement of the Real Estate (Regulation and Development) Act 2016 (RERA). Several states have diluted its provisions, leading to non-compliance with orders passed by regulatory authorities. Improved checks and balances are essential to ensure accountability and transparency.

    Reducing Transaction Costs

    The government should consider reducing stamp duty and moderating the GST burden on under-construction projects to maintain buying momentum, a key accelerator for GDP growth. Streamlining project approvals through a single-window clearance system is also critical. Approval delays remain a significant bottleneck, and addressing this will expedite project timelines and reduce costs.

    Increasing Income Tax Exemption Limits

    Increasing income tax exemption limits on home loan repayments and interest, which have not been adjusted since 2014, would provide much-needed relief to homebuyers and stimulate demand.

    Better Urban Planning

    Better urban planning is crucial as cities are under tremendous pressure. Implementing master plans is vital for sustainable development. Despite the Delhi Master Plan MPD 2041 being ready, it has not been notified for over a year. Prompt implementation of such plans is essential to manage urban growth effectively.

    Conclusion

    As the new government assumes office, the real estate sector is optimistic about the potential of focused policy interventions. By prioritizing affordable housing, streamlining regulatory frameworks, and implementing prudent policy reforms, the government can pave the way for a vibrant and sustainable real estate ecosystem that fuels economic growth and social progress.

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