NEW DELHI: India’s booming real estate sector is seeking a slew of reforms from the NDA government in the upcoming union budget to keep the demand momentum alive amidst concern that an exorbitant rise in property prices may dampen the sentiments. Finance Minister Nirmala Sitharaman is set to present the FY24-25 Budget on July 23rd.
Industry body for developers NAREDCO has demanded the launch of the second phase of the Special Window for Affordable and Mid-Income Housing (SWAMIH) with a corpus of Rs 50,000 crore in FY24-25 to revitalize the affordable housing segment.
The other key demands from NAREDCO and developers include increasing the home loan interest deduction limit from Rs 2 lakh to Rs 5 lakh and allowing builders the option to pay GST at a concessional rate without input tax credit (ITC) or at a higher tax rate after availing of ITC.
Currently, GST on affordable housing units is levied at 1% without ITC and at 5% without ITC on other residential units. “The option to choose between concessional rates without ITC or higher rates with ITC would result in tax cost savings and better cash flows for developers, ultimately benefiting end customers,” said NAREDCO.
Ajay Jaiswal, Chief Operating Officer, IIFL Home Finance Limited said that their foremost expectation from the government is to prioritize affordable housing initiatives, particularly by revitalizing schemes like PMAY (Pradhan Mantri Awas Yojana) for the Economically Weaker Sections (EWS) and Low-Income Groups (LIG).
Additionally, the industry wants revision of affordability housing caps under the PMAY, increasing the price cap from the existing Rs 45 lakh level. The focus on affordability comes as the share of affordable housing in total residential sales across top cities has more than halved in the last 5-6 years.
In the recent past, the share of affordable homes fell from 27% in Q12022 to 15% in Q12024 — the lowest market share for affordable homes in years, according to property consultant JLL. In contrast, the share of premium and luxury housing segment has registered a sharp uptick.
K.T. Jithendran, MD & CEO, of Birla Estates said that they expect reforms such as increased rebates, and reduced GST rates to capitalize on the sales momentum and promote sustainable growth.
“Increasing the home loan interest deduction limit from Rs 2 lakh to Rs 5 lakh would enhance affordability for homebuyers. Furthermore, pivotal reforms such as granting industry status to attract investments and streamlining regulations will help stimulate demand from homebuyers and developers, address liquidity concerns, and simplify regulatory processes,” added Jithendran.
Sandeep Runwal, Managing Director, Runwal said that to boost investment in the sector, they would suggest reducing long-term capital gains taxes on property and streamlining REITs coupled with increasing the limit of interest rebates for housing loans.
“Additionally, the implementation of modern regulatory frameworks and the Urban Governance Curriculum will positively impact the real estate sector,” added Runwal.
