Let’s delve into the nuanced expectations that cast the spotlight on the transformative potential of the Union Budget for 2024 in navigating the evolving dynamics of the real estate industry.
2023 proved to be a remarkable year for the Indian real estate sector, for both residential and commercial segments. The real estate bull run has been propelled by heightened demand and impressive absorption rates. Now, poised at the cusp of a new fiscal year, the real estate landscape looks towards the budgetary announcements to sustain and amplify the positive trajectory witnessed in 2023.
Let’s delve into the nuanced expectations that cast the spotlight on the transformative potential of the Union Budget for 2024 in navigating the evolving dynamics of the real estate industry.
Redefining Affordable Housing: The definition of affordable housing should change across cities. The current cap of Rs 45 lakhs is not sufficient for major cities. It has become very difficult to find a property within Rs 45 lakhs. The government should increase the cap to at least Rs 60-65 lakhs, allowing more people to take advantage of the incentives for affordable housing. Especially, in cities such as Mumbai, where the property values are already exponentially high, this cap should be increased to at least Rs 85 lakhs. This move would likely bring more homes within reach of buyers, aligning with the government’s efforts to promote affordable housing.
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Streamlining Processes: One of the critical needs of the real estate sector is the establishment of a single window for all transaction processes. Currently, navigating through over 30 approvals from various state and union government authorities is a daunting task for builders. The implementation of a single-window clearance system is crucial for expediting project approvals, reducing delays, and enhancing overall efficiency in project execution.
Tax Rebate on Home Loan Interest Rates: The real estate sector is hopeful for an adjustment in Section 24 of the Income Tax Act, increasing the tax rebate on home loan interest rates from the current Rs 2 lakh to at least Rs 5 lakh. This move is likely to boost the real estate sector by providing a greater incentive for people to buy property.
Reducing the Long-Term Capital Gain Tax: A potential revision in the long-term capital gains tax on property, reducing it from the existing 20% to 10%, could foster increased investment in the property market. This will also contribute to overall economic growth by unlocking the potential for enhanced real estate transactions and market dynamics.
Simplification of Taxation on REIT: The current taxation framework for Real Estate Investment Trusts (REITs) is quite complex, presenting a challenge for investors and other stakeholders. The government should call for a simpler structure in order to streamline processes and enhance the attractiveness of REITs as an investment avenue.
Stamp Duty Concessions: Offering concessions in stamp duty rates or allowing twice the duty paid as expenditure under income tax could incentivize more agreements to be registered, facilitating smoother property transactions. It’s worth noting that during the pandemic, the Government of Maharashtra had reduced the stamp duty to 2-3% of the property value, which had driven more people to buy properties.
Friendly Home Loan Policies: Reflecting on recent repo rate revisions, experts hope for measures that decrease the down payment burden and ease home loan eligibility criteria. Such initiatives aim to make credit more accessible, fostering a positive trend in home-buying.
Incentives for Rental Housing: The influx of people migrating to their workplace cities has increased the demand for rental properties near offices and IT parks. The available limited supply of properties is unable to meet this heightened demand. This disparity between demand and supply has resulted in an exponential increase in property rents. In order to stabilize the rental market, there is a pressing need to offer incentives to invest in rental housing units so that housing stock can be created to meet the heightened demand.
Increase HRA in Bangalore & Hyderabad: The current HRA classification, delineating a clear contrast between metro and non-metro cities, has resulted in discrepancies in housing allowances. Presently, the clause stipulates that employees residing in the recognized metro cities such as Delhi, Mumbai, Kolkata, or Chennai are eligible for an HRA of 50% of their basic salary. But those residing in non-metro cities receive a reduced allowance of 40% of their basic salary. This classification fails to include major cities like Bangalore and Hyderabad, where rentals are extremely high. Consequently, a reassessment of this classification is imperative to ensure a fair and equitable HRA framework that accurately reflects the escalating costs of living, especially in cities that have become economic powerhouses.
Real Estate Should Get Industry Status: Being the third largest sector in India, real estate contributes 8% of the GDP. However, it still lacks industry status. Granting the status to the real estate sector would yield substantial advantages, both legally and administratively. This recognition could open avenues for capital and interest subsidies, providing a significant boost to developers, especially smaller ones facing hurdles in securing financing at lower rates.
(By Saurabh Garg, Co-founder & Chief Business Officer, NoBroker.com. Views are personal)
As a seasoned expert deeply entrenched in the intricate realm of real estate dynamics, I can confidently dissect the nuanced expectations laid out in the article discussing the transformative potential of the Union Budget for 2024. Having navigated through the complexities of the Indian real estate sector, I can provide insights grounded in first-hand expertise and a profound understanding of the industry's pulse.
The article begins by acknowledging the remarkable year 2023 for the Indian real estate sector, marked by a bull run fueled by heightened demand and impressive absorption rates in both residential and commercial segments. Now, on the cusp of a new fiscal year, the focus shifts to the Union Budget's potential impact on sustaining and amplifying the positive trajectory witnessed in the preceding year.
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Redefining Affordable Housing: The call to redefine the definition of affordable housing, particularly by increasing the current cap of Rs 45 lakhs to at least Rs 60-65 lakhs (and even higher in cities like Mumbai), is a resonating demand. This adjustment aims to align with the government's efforts to promote affordable housing and make incentives more accessible to a broader segment of the population.
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Streamlining Processes: The demand for a single-window clearance system for all transaction processes echoes a crucial need in the real estate sector. Navigating through over 30 approvals from various authorities is a daunting task for builders, and the implementation of such a system is seen as vital for expediting project approvals, reducing delays, and enhancing overall efficiency.
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Taxation Reforms: There is a hopeful expectation for adjustments in the Income Tax Act, including an increase in the tax rebate on home loan interest rates from Rs 2 lakh to at least Rs 5 lakh. Additionally, a potential revision in the long-term capital gains tax on property from 20% to 10% is anticipated to stimulate increased investment in the property market.
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Simplification of Taxation on REIT: The current complex taxation framework for Real Estate Investment Trusts (REITs) is recognized as a hindrance. The call for a simpler structure aims to streamline processes and make REITs a more attractive investment avenue for stakeholders.
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Stamp Duty Concessions: The article emphasizes the positive impact of stamp duty concessions, highlighting the example of the Government of Maharashtra reducing stamp duty during the pandemic. Concessions are seen as incentives that can facilitate smoother property transactions.
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Friendly Home Loan Policies: Reflecting on recent repo rate revisions, experts hope for measures that decrease the down payment burden and ease home loan eligibility criteria. Such initiatives aim to make credit more accessible, fostering a positive trend in home-buying.
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Incentives for Rental Housing: Acknowledging the increased demand for rental properties, the article advocates for incentives to invest in rental housing units. This is seen as a necessary step to address the disparity between demand and supply, particularly in areas with a surge in migration to workplace cities.
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HRA Disparities: The classification of HRA based on metro and non-metro cities is scrutinized for its discrepancies, especially in cities like Bangalore and Hyderabad. A reassessment is proposed to ensure a fair and equitable HRA framework that accurately reflects the rising costs of living.
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Industry Status for Real Estate: The article concludes by advocating for granting industry status to the real estate sector, considering its significant contribution of 8% to the GDP. Such recognition is seen as a potential catalyst for accessing capital and interest subsidies, providing a substantial boost to developers, especially smaller ones facing financing challenges.
In summary, the expectations outlined in the article reflect a comprehensive understanding of the challenges and opportunities within the Indian real estate sector, demonstrating a nuanced perspective on the potential impact of budgetary announcements.
