Real Estate Expectations from Budget 2024-25: As the newly formed Modi 3.0 government settles in, all eyes are on the upcoming Budget 2024-25, which Finance Minister Nirmala Sitharaman is likely to present on July 23. The real estate sector has high hopes for this budget, with demands ranging from tax reliefs to affordable housing initiatives and land-related announcements.
In the past few years since early 2022, the luxury real estate segment has been gaining fast traction. However, the affordable sector has taken a backseat as compared with the luxury segment. Here are some expectations of the real estate from the upcoming Union Budget 2024-25:
Industry Status for Real Estate
The real estate sector has been advocating for the ‘industry’ status, which it said will attract investments and streamline regulations. This year also, it is reiterating the demand for the real estate sector.
Bhavesh Kothari, founder & CEO of Property First, said, “We urge the finance minister to implement tax reliefs in terms of reduction in GST rate along with an input tax credit on under-construction properties.”
Granting the industry status to real estate will attract investments and streamline regulations, said Pradeep Aggarwal, founder & chairman of Signature Global (India) Ltd, and chairman of the ASSOCHAM National Council on Real Estate, Housing and Urban Development.
Tax Recommendations: Loan Interest Deductions and Capital Gains
The real estate industry is demanding raising interest deduction limit on housing loans under Section 24B from Rs 2 lakh to Rs 5 lakh, apart from reducing holding period from 24 months to 12 months and long-term capital gains tax rate, which is currency levied at 20 per cent.
Currently, interest deductions on home loan is available under two sections — Section 80C and Section 24B.
“This tax deduction should be entirely moved out of Section 80C, since it gets clubbed with other critical instruments such as life insurance, PPF, etc,” said Anshuman Magazine, chairman and CEO (India, South-East Asia, Middle East & Africa) of CBRE, in his Budget 2024-25 recommendations.
He added that the exemption limits have remained stagnant for a long time and have not been indexed to inflation. “We urge the government to raise this limit (Section 24B) to at least Rs 5 lakh per annum.”
Bhavesh Kothari, founder & CEO of Property First, said, “We urge the finance minister to grant industry status to the real estate sector that would be another significant step that would catalyse growth and contribute to the nation’s economy.”
On Affordable Housing
The sector is pressing for the government to raise the cost, size, and income criteria for affordable housing to make it more inclusive.
Currently, the criteria for affordable housing are based on the cost of the property (Rs 45 lakh), carpet area (60 sq. m to 90 sq. m), and income of the homebuyer (EWS / LIG).
“The government should consider increasing the size criteria for metro cities to 90 sq. m. and establishing three to four brackets of unit sizes and prices to define the eligibility criteria depending on city / state dynamics, as capital values in larger metro cities (Mumbai, Delhi-NCR) can be significantly higher vis a vis other cities.” Magazine said.
Signature Global’s Pradeep Aggarwal also said that stakeholders are advocating for raising the affordability cap of housing from Rs 45 lakh to Rs 75 lakhs in metro cities like MMR and NCR to make housing more accessible.
G Hari Babu, national president of NAREDCO, said the government should come up with the second tranche of the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund with Rs 50,000 corpus in the upcoming union budget for FY 2024-2025, along other budgetary support and relaxations including allowing input tax credit under GST and incentives for rental housing in order to achieve the housing for all target.
Land Unlocking and Development
The industry also recommends the government to unlock Port Trust land, railways, and defence unused land parcels.
“We recommend unlocking these land parcels and partnering with credible private developers to develop affordable housing once the land and approvals are in place. These land parcels could also be leveraged for the development of industrial parks and related infrastructure,” said CBRE.
NAREDCO’s G Hari Babu said since the sale of land is exempt and the construction of an area is like a works contract, suitable amendments are to be carried out to set out the exemption and such treatment. Accordingly, since the sale of land is not subject to GST, taxing grant of development rights or long-term lease rights which are in the nature of benefits arising out of land in the manner provided under the Notifications based on the market value of flats / commercial offices, is not appropriate given the nature of the transaction.
Any development agreement granting development rights is no different from any transaction of sale of land for consideration in the form of the construction of an area. The same is the case with the transfer of TDR. It may be noted that in several Supreme court judgements benefits arising from land is held to be “land”, he added.
Boosting Rental Housing
While the passage of the Model Tenancy Act (MTA) is a positive move for the rental housing segment, India continues to be at the lower spectrum of gross rental yields, with most investors historically relying on property price escalation for financial returns.
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“The government can consider providing certain exemptions to this segment through a 5-year property tax holiday, facilitating ease of capital for build-to-lease and rent-to-own residential projects by instituting a special fund for such developers, etc,” CBRE said.
Santosh Agarwal, CFO and Executive Director of Alphacorp said, “The budget presents a pivotal opportunity to bring forth a positive change in our urban landscape. A balanced approach that fosters both investment and affordability will not only lead to economic growth but also boost housing demand in the times to come.”
first published: July 04, 2024, 13:06 IST