Union Budget 2024: What does the real estate sector expect?

The Indian real estate sector has been experiencing a significant boom in the recent quarters driven by factors such as rapid urbanisation, policy reforms, increase in disposable income and a continuous growth in consumer sentiments. Last year, the sector registered remarkable progress, consolidating its position among various other sectors.

With budget 2024 approaching, a strong sense of optimism prevails throughout the sector. There are numerous prerequisites that we are looking forward to being fulfilled, including a potential decrease in the GST rate, lower interest rates on home loans, decline in property prices overall, implementation of a more efficient single-window clearance system, and the development of off-centre locations.

One major expectation from this year’s budget is granting of industry status to the sector. The real estate industry has played a significant role in boosting the country's economic growth. Granting industry status to this sector will not only attract more investments but also streamline various governing procedures.

Let’s take a look at some of the key expectations of the real estate sector:

Reduction in GST and interest rates

There is a strong possibility that there will be a reduction in GST rates. The introduction of the GST input tax credit rule is expected to reduce prices of property, thereby enhancing transparency in the overall process. This step is critical for organisations leading the real estate sector’s transition into a new era, fostering sectoral growth not only for homebuyers but also for the economy.

The industry is also expecting a possible reduction in GST rates and measures to stabilise the costs of materials. These actions could have a significant positive effect on developers and homebuyers. If these strategic measures are implemented, we can envision a thriving real estate market that fulfils the dreams of developers and homebuyers, while also contributing to economic growth nationwide.

On the other hand, increasing the rebate on home loan interests under Section 24 from ₹2 lakhs to ₹5 lakhs could give housing demand a substantial shot-in-the-arm. Enhancing budget allocation for urban infrastructure, decreasing stamp duty rates and proposing waivers for first-time homebuyers would further stimulate growth.

Encouraging the growth of affordable housing

The current government’s focus has been ‘Housing For All’ for a while and in this budget, it is expected this goal will gain further impetus. Expanding affordable housing to embrace residential properties ranging between ₹65 lakhs to ₹75 lakhs with significantly larger carpet areas clubbed with the re-launching of credit-linked-subsidy-schemes (CLSS) will be beneficial to homebuyers. Apart from that sustained investments in housing and urban development and infrastructure are crucial for ongoing growth, enhanced standard of living and more job creation.

We are also anticipating enhanced tax benefits on Home loans. There is an increasing call to raise the deduction for principal repayment under Section 80C from the current amount of Rs. 1.5 lakh to Rs. 2.5 lakh, going beyond just interest rate rebates. If this adjustment is implemented, it would provide substantial relief to homebuyers by making home loans more affordable. Moreover, it would further fuel investment in the sector encouraging more people to buy residential properties. Enhancing tax benefits would ease the financial burden on individual homebuyers and at the same time contribute to the growth of the housing market.

We anticipate the government will make certain land holdings available at lower costs, particularly for affordable housing projects. This would help reduce overall prices of real estate, making housing affordable and accessible for all.

Increased focus on sustainability

There is a growing anticipation regarding the introduction of certain incentives curated to upkeep sustainable and eco-friendly homes or residential projects, particularly within the affordable housing segment. These incentives may include favourable loan-terms, subsidies and tax benefits for developers and buyers who prioritise green building practices.

The rationale behind this expectation is twofold: firstly, it addresses the pressing need for environmental sustainability by reducing carbon footprint and resource consumption associated with inclusive real estate development. Secondly, it provides housing options that are not only affordable but also comply with energy-efficient regulations, resulting insubstantial long-term savings and an enhanced quality of life. Promoting green housing projects will not only align with bigger environmental goals but will also support the urgent need for affordable housing solutions.

Priority to infrastructure development

As the budget draws closer, we expect the government to implement measures to stimulate growth and sustainability across the sector. Our expectation is that the government will prioritise infrastructure development, streamline regulatory processes and offer incentives for green building practices. By introducing certain reforms to uplift transparency along with ease of business, we can encourage investment and ensure long-term economic stability. The sector is hopeful that the budget will lay the foundation for a stronger and more resilient real estate landscape.

Ultimately, if these policies get implemented, the real estate sector will continue on its path of steady growth.

Atul Monga, Co-Founder and CEO, BASIC Home Loans