With all eyes set on the upcoming Union Budget 2024, expectations are soaring high on various fronts including the real estate industry. The real estate sector, in turn, has substantial influence over the country’s economy, amplifying the expectations within the real estate community. The real estate industry has shown resilience amidst the pandemic’s challenges. This resurgence instils confidence, paving the way for an even more favorable budget in 2024. Thus, a strategically crafted budget aimed at promoting sustainable growth and that aligns with the evolving dynamics of the market is anticipated.
Building on the stimulus of the previous union budget, one can expect a continued emphasis on affordable housing initiatives to boost consumer confidence and sentiment in affordable housing schemes of the government by an expected enhancement in the budget for Pradhan Mantri Awas Yojana (PMAY) scheme. Not only will this ease in employment generation and increased economic growth but will also help in ensuring accessibility of homes to a wider range of population thereby taking a leap towards achieving the housing-for-all initiative of the government. To stimulate the demand further in the affordable housing segment and encourage property investments, the government may also reduce the stamp duty rates applicable to sale/purchase transactions involving immovable properties or even increase the rebate in interest rate under home loans.
The construction practices generally adopted in the real estate sector tend to have a major impact on the environment and its sustainability. Given the need to address escalating environmental challenges and to foster a culture of sustainable development, one can anticipate from the Union Budget 2024 a set of green building practices and measures to be adopted by developers. Additionally, environment friendly construction technologies to incentivise developers to increasingly adopt and implement such practices may also be pressed upon. This approach will align with the growing importance of sustainable development in the real estate sector, promoting environmentally conscious practices and meeting the demands of a conscientious market.
Another aspect that may be dealt with in the budget is the single window clearance system which has been much awaited in order to ensure that there is one stop shop for clearance of all project related approvals leading to not only enhanced project completion timelines but also ensuring transparency in the project execution mechanism and considerably reducing delays thereby benefitting all stakeholders including the government, developers as well as home buyers.
The budget may also be expected to rationalize the taxation rates in relation to capital gains (short term and long term) arising from the sale of immoveable properties along with a review of the holding period applicable for calculation of capital gains tax. The budget may also be expected to give more clarity on the deduction limit of INR 10 crores (which was specified in Budget 2023) for deduction on long-term capital gains tax for reinvestment in residential houses under Section 54 and 54F of the Income Tax Act, 1961. Learnings from the previous budget highlight the sector’s concerns and addressing these aspects will play a crucial role in shaping investor decisions.
The Unique Land Parcel Identification Number (ULPIN) is a critical aspect that may witness further streamlining in the upcoming budget. ULPIN is a 14-digit identification number accorded to a land parcel which would uniquely identify every surveyed parcel of land and assists in preventing land fraud, especially in rural India, where land records are outdated and disputed. Understanding ULPIN’s role in reducing fraud and enhancing investor confidence underscores the industry’s commitment to transparency and efficiency in land transactions. In view of the aforesaid, there is also a likelihood of the budget further streamlining the process of attribution of ULPIN to land parcels to reinforce investor confidence.
Another aspect that can be instrumental in re-shaping the taxation landscape in the real estate industry in the country is inheritance tax. Inheritance tax is the tax that is required to be paid on the income from property inherited pursuant to the death of an individual. It will be useful to get clarity on the introduction of inheritance tax, as it could play a pivotal role in promoting fiscal responsibility, social equity, and sustainable economic practices. The hope is for the budget to introduce measures that not only alleviate the impact of inheritance tax but also foster an environment conducive to long-term wealth creation.
There is also a simultaneous pressing need for budget provisions that target liquidity challenges in stalled housing/commercial projects. Investors and industry players are looking for decisive actions to unlock capital and reignite projects that have encountered stagnation.
Views are personal. The author is Partner, Shardul Amarchand Mangaldas & Co