Budget 2024 Anticipations: Real Estate Industry’s Wish List

Budget 2024 Anticipations: Real estate consultancy firm Knight Frank India reported on Wednesday that the sales of residential properties priced at Rs 50 lakh and below declined to 97,983 units last year from 1,17,131 units in 2022. Consequently, the share of affordable homes in total housing sales has decreased to 30% from 37%.

The decline in sales of affordable homes is attributed to subdued demand due to the combined impact of rising property prices, increased home loan rates, and the disproportionately adverse effects of the pandemic in this category, according to the consultant.

On the contrary, JLL, in its report, anticipates an improvement in affordability for home purchases in 2024. This expectation is based on the anticipation of a 60-80 bps repo rate cut in 2023, which is expected to keep buyers’ affordability within a comfortable range and sustain market momentum in the coming year.

During this period of various growth figures, the industry expresses its expectations, hoping for them to be addressed in the upcoming Union Budget scheduled for presentation on February 1st. The upcoming budget is an interim one, typically presented when there’s insufficient time for a full budget, often due to upcoming elections or the end of a government’s term, serving as a bridge until the new government presents a full budget.

The real estate industry routinely presents an ambitious wish list to the Finance Ministry before the annual Union Budget.

Anticipations for Budget 2024: Real Estate
Anuj Puri, Chairman of Anarock Group, stated that the residential real estate market experienced extraordinary growth in 2023, with record-high new launches and home sales. In 2023, sales of housing in the top seven cities reached an all-time high of about 4.77 lakh units, while sales of newly launched homes reached almost 4.46 lakh units. Puri added that the outlook for the real estate industry in 2024 is positive, but the results of the upcoming general elections will also significantly impact the demand for and growth in residential real estate.

Industry status for the housing sector and single-window clearance for housing projects remain standard expectations this year as well. However, given the generally slow pace at which issues in the real estate sector are resolved, these expectations persist, though they remain as urgent as ever. That said, reasonable expectations are necessary for the interim budget before the general elections.

Maximum Deduction for Home Loans (under Section 24)
It is imperative to raise the Rs 2 lakh tax rebate on home loan interest rates provided under Section 24 of the Income Tax Act to at least Rs 5 lakh. This move could stimulate a more robust housing market, especially in the budget homes segment, which has seen a decline in demand since the pandemic.

Decisive Boost for Affordable Housing
The affordable housing segment has been severely affected by the pandemic, with a decline in overall sales to approximately 20% in 2023 from over 30% in 2022 and nearly 40% in the period before the pandemic, according to Anarock Research.

Several interest stimulants for developers and consumers in this market have expired in the last one to two years. To encourage developers to construct more affordable housing and enable customers to acquire such homes, it is essential to revive and extend significant benefits, such as tax breaks.

Modifying the qualifying standards for affordable housing to make more buyers eligible for additional deductions is necessary. The Ministry of Housing and Urban Poverty Alleviation defines affordable housing based on the buyer’s income, property size, and price. The government needs to reconsider the qualifying cost of properties within the affordable housing segment in cities, as the current definition of up to Rs 45 lakh makes them unaffordable for a significant share of the target clientele.

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