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The real estate sector’s expectations from Budget 2024, which is a vote on account or an interim budget, include changes in the definition of affordable housing, increase in exemption on principal amount as well as the interest paid on home loans, infrastructure status for the real estate sector and greater retail engagement in Real Estate Investment Trust or REITs.
![The Uttar Pradesh government’s December 19 announcement of a new policy intends to cater to the stalled housing projects. (Sunil Ghosh/HT Photo) The Uttar Pradesh government’s December 19 announcement of a new policy intends to cater to the stalled housing projects. (Sunil Ghosh/HT Photo)](https://www.hindustantimes.com/ht-img/img/2024/01/23/550x309/Housing_1706005765704_1706005765912.jpg)
Tax exemptions
In its pre-Budget wish list, the body of real estate developers, Confederation of Real Estate Developers’ Associations of India (CREDAI), has urged the government to increase tax exemption limit on principal amount as well as interest paid on home loans to boost demand for residential properties.
In its pre-Budget recommendations, it suggested that the deduction for principal repayment of housing loan should be considered for a separate or standalone exemption. CREDAI has sought deduction under section 80C for principal repayment of housing loan should be increased from the existing limit of ₹1.5 lakh.
Also Read: Delhi-NCR’s real estate market: Here’s why rich Indians are lapping up luxury properties
Colliers India also recommended increasing the deduction limit for interest repayment on home loans can lead to higher disposable income in the hands of affordability of homebuyers especially for the EMI dependent ones. The existing limits of principal repayment of housing loans under section 80C can be raised further providing a boost to sales of housing units. Key expectations include a separate and higher deduction for housing loan principal repayment, currently capped at ₹150,000 under section 80C.
Limit on tax deduction on interest paid should be increased from the current ₹2 lakhs to about ₹3-4 lakhs in case of self-occupied property. In case of let-out property, limits can be dropped entirely, it said.
“Interest exemptions under 80EEA and 80EE (applicable for first-time homebuyers in affordable housing) can be increased from current capping of ₹150,000 and 50,000 respectively. Tax exemptions for first-time homebuyers, especially in the affordable segment, should be reintroduced,” said Badal Yagnik, Chief Executive Officer, Colliers India.
Changes in definition of affordable housing
The real estate sector has also recommended standardization and rationalization in the definition of affordable housing across government schemes and financial institutions can help homebuyers qualify for cheaper financing options in the particular category.
Also Read: Home loan interest subsidy scheme for urban areas in final stages: Puri
Credai noted that the definition of affordable housing, which was capped at ₹45 lakh, was given in 2017 and is yet to change since.
Due to inflation alone, there has been a significant rise in real estate prices in the past 7 years. As per data from the National Housing Bank (NHB), there has been an increase of 24 per cent in housing rates since June 2018 in India, which makes the current cap of ₹45 lakh extremely unfeasible for developers to adhere to, Credai said in its list of recommendations.
It recommended that the definition of affordable housing be revised as “a unit with 90 square meter RERA carpet area in Metros Cities and 120 square meter RERA Carpet Area in Non-metros without a cap on cost of the unit”.
Colliers India said that with the government’s ambitious Housing for All initiative at its final leg, there is a widespread hope for targeted incentives and subsidies to boost affordable housing projects. Potential measures could include tax breaks for developers focused on affordable housing, thereby encouraging increased supply to meet the rising demand in urban and rural areas. A 100% tax holiday for affordable housing projects under Section 80IBA should be re-introduced, it said.
Grant infrastructure status to the real estate sector
The real estate sector also wants the government to grant it infrastructure’ status that will ensure easier access to institutional credit and help reduce developer’s cost of borrowing.
Greater retail engagement in REITs
The Union Budget 2024-25 should explore initiatives to boost greater retail engagement in REITs.
“REITs and InvITs have made a significant contribution to the growth of the real estate and infrastructure sectors. To further help these instruments grow, certain long-standing tax asks aligning these instruments with listed equity shares is imperative. The recent SEZ rule amendment is a progressive policy reform which will help REITs and other commercial real estate companies unlock vacant spaces in the IT/ITeS Parks, while adding to employment creation and boosting economic activity. An amendment to the CGST Act, enabling real estate players to avail input credit during the construction phase, will also help reducing costs and support the growth of this asset class,” said Ramesh Nair, CEO| Mindspace Business Parks REIT.
Also Read: IT SEZs now allowed to lease space in major real estate reform
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