Real estate sector pins hopes on Modi 3.0; pushes for focus on infra development and affordable housing

The real estate sector hopes that the new government will continue to focus on infra development, affordable housing, streamlining of the regulatory framework, single window clearance mechanism and rationalization of taxes to stimulate investment and growth in the sector.

Narendra Modi took oath as Prime Minister for the third consecutive time along with his new Cabinet and council of ministers at the Rashtrapati Bhavan on June 10 evening. 

Efforts must be directed towards reviving affordable housing

Niranjan Hiranandani, chairman, Naredco National, said that efforts should be directed towards reviving affordable housing to overcome growth retardation in that segment.

“India Inc. welcomes the new government on board…to boost economic performance indicators, the real estate industry recommends that the new government should focus on the PMAY scheme to achieve all housing goals efficiently in a time-bound manner,” he said.

Also Read: Share of luxury homes' sales now almost at par with affordable housing units

Focus on infrastructure development
Focus on infrastructure investment will greatly benefit commercial, residential, and industrial real estate development across the country and promote last-mile connectivity, he said.

Reduce cost of approvals, rationalise taxes and GST

The new government should also consider reducing the cost of approvals, development premiums, stamp duty, and ready-reckoner rates, in addition to rationalizing taxes and GST to accentuate growth, he said.

Fiscal incentives should also be provided for adoption of construction technology and sustainable development, he said, adding land and approval financing methodologies must be outlined to facilitate growth and aid in timely completion of projects.

Also Read: Leasing by Global Capability Centres in India increases by 17%; touches 22.5 mn sq ft in FY 2023-24

"The government must consider tax rationalization for construction raw materials, as this will significantly impact the industry. To boost the housing segment further, we believe the affordable housing definition needs to be revisited. 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," said Anshuman Magazine, Chairman and CEO - India, South-East Asia, Middle East & Africa, CBRE.

It should be noted that the interim budget had indicated that with the government’s policies unchanged, the mid-segment housing sector would witness targeted action and policy alignment that would lead to further growth of India's housing sector. 

The mid-end (homes priced ₹40 lakh to ₹80 lakh) and high-end (homes priced ₹80 lakh to ₹1.5 crore) segments together recorded sales of 76,555 units in Q1 2024 which accounts for a share of nearly 59% of the total. The cumulative share supply for these segments in Q1 2019 was 47%, according to data shared by Anarock.

Also Read: 87% of office occupiers want half of their commercial portfolios powered by green energy sources by 2030: JLL

“With government continuity, we can look forward to a major boost for the affordable housing sector, this being a flagship scheme that had not fared well over the last term. Affordable housing (homes priced under ₹40 lakh) sales in Q1 2024 recorded 26,545 units, which is just 20% of the total sales. Concurrently, supply in this critical segment had also dropped from 44% in Q1 2019 to 18% in Q1 2024,” said Anuj Puri, chairman, Anarock Group.

NAREDCO National President G Hari Babu said that “Making affordable housing more accessible by adjusting financial limits and providing incentives for builders is critical for the real estate sector’s progress.”

Reduce home loan rates

The increase in home loan interest rates from 6.25% before COVID-19 to around 8.75% today has made monthly EMIs very expensive, particularly for middle-class families. “We urge the government to provide relief by offering lower interest rates for affordable housing loans. This can be achieved by setting the first ₹20 lakh or ₹25 lakh of a home loan at a 5% interest rate for the first five years,” said Babu.

Also Read: RBI Policy review: Unchanged interest rates expected to have a stabilizing effect on the real estate sector, say experts

The real estate sector wants specific policy reforms to stimulate growth, particularly in affordable housing. “Raising the ₹45 lakh limit to ₹60 lakh is one such reform that would address the challenges faced by builders and buyers. This adjustment would account for the significant increase in land costs over the past seven to eight years," he said.

Increasing the ₹45 lakh limit to ₹60 lakh would make it more feasible for builders to construct affordable homes and for buyers to purchase them. This change would reflect the current economic realities and help maintain the momentum in the affordable housing market. The original limit was set seven years ago, and adjusting it to match inflation and land cost increases is crucial, he added.

Streamline regulatory framework

Experts said that several measures brought in by the government earlier, such as RERA, need far more fine tuning, to be effective in spirit. 

Also Read: MahaRERA mandates self-declaration of real estate project quality by developers

“As part of its first 100 days agenda, we believe the NDA government should consider and take decisive steps to support and improve the real estate sector. Firstly, the Real Estate (Regulation and Development) Act 2016, a landmark Act enacted by the BJP-led government, should focus on its stricter enforcement. 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,” said Amit Goyal, managing director, India Sotheby's International Realty.

Another important area to address is the significant additional costs, especially the levied taxes on real estate transactions. 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, he said.

Additionally, 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.

Last, but not the least, better urban planning is crucial. Cities are under tremendous pressure, and implementing master plans is vital for sustainable development. For instance, 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, he added.