By Akash Pharande, Managing Director – Pharande Spaces
The Indian real estate sector is a crucible of economic growth and employment. The sector stands at a crossroads as the government prepares to present its Union Budget. Though it has massive potential, the Indian housing industry still faces numerous hurdles.
To generate more growth and address the housing needs of the growing population, particularly in the low and mid-income segments, the budget must include tax breaks, regulatory reforms, and financial assistance measures.
Affordable and mid-income housing
Affordable and mid-income housing is the foundation of the real estate industry, meeting the urgent housing needs of the enormous LIG and middle-class population. To significantly boost this section, the following strategies are critical:
Interest Subsidies and Housing Loans: Widening the scope of the Pradhan Mantri Awas Yojana (PMAY) and raising the interest subsidy for housing loans is the need of the hour. Doing this will make homeownership more affordable. Reducing interest rates will also lower the financial stress put on aspiring homebuyers.
Enhanced Credit-Linked Subsidy Scheme (CLSS): Extending and improving the CLSS can provide financial relief to mid-income housing buyers. Both the income eligibility threshold and subsidy amount should be raised.
Single-window Clearance for Affordable Housing: A single-window clearance system for budget home projects will help considerably to make the incredibly complex approval process more streamlined and simple. This, in turn, would help to decrease delays in possession of such units and reduce the overall costs.
Tax breaks to lighten the load
Tax breaks are critical when it comes to making homeownership more approachable, and they can also encourage builders to take on new affordable housing projects:
Raise Tax Deduction for Housing Loan Interest: Raising the tax deduction limit under Section 24(b) of the IT Act is long overdue and the need of the hour. The deduction limit should be increased from the current Rs. 2 lakh to at least Rs.3 lakh or even more.
Reduce Stamp Duty: The government can encourage state governments to cut their stamp duty rates, which account for a significant portion of the cost of homeownership. Even a temporary decrease or waiver of stamp duty on affordable and lower-middle-income housing can boost demand and sales.
Incentives for First-Time Buyers: First-time homebuyers should get further sentiment boosters. For instance, the government can raise the deduction limit under Sections 80EE and 80EEA for such buyers.
GST Reforms For Developers: GST rates applicable on construction materials and services can help lower overall project costs for builders. Also, a reduced GST rate for affordable housing projects would help attract more builders to this vital segment and to pursue such projects.
Policy Measures and Provisions: Indirect Increases
Apart from direct financial boosters, the budget can introduce many policy initiatives that will indirectly improve sentiment in the housing sector:
Fast Track Infrastructure: This government is certainly determined to develop infrastructure like roads and public transport such as metros and railways. This helps expand the metropolitan areas and boosts affordable housing, which is usually developed in emerging areas where land is cheaper and infrastructure is still catching up. However, we need a much faster roll-out of such projects so that connectivity to such areas improves at a faster pace.
Land Reforms: Simplifying the overall land acquisition process will help developers speed up their supply of new projects. There is an express need for an open and effective land records management system that reduces disputes and, therefore, project delays.
Better Finance Access: Developers always need access to financing, but smaller and medium-scale players are at a bigger disadvantage than big players. The budget could consider announcing a separate real estate investment fund and also credit guarantees to such builders so that their cash flow improves.
Rental Housing Policy: Rental housing would benefit from favourable policies and tax incentives for those who cannot afford to buy homes. Implementing a model tenancy law and providing tax breaks on rental income would help a lot.
The Union Budget is an ideal platform and opportunity for the government to give teeth to its Housing for All scheme. While the original 2022 deadline was not met, it is not too late to revive this dream and make it a concrete reality. The Indian real estate sector certainly looks forward to such boosts for both homebuyers and builders.
About the Author:
Akash Pharande is Managing Director – Pharande Spaces, a leading real estate construction and development firm famous for its township projects in Greater Pune and beyond. Pharande Promoters & Builders, the flagship company of Pharande Spaces and an ISO 9001-2000 certified company, is a pioneer of townships in the region. With the recent inclusion of Puneville Commercial into one of its most iconic townships, Pharande Spaces has taken a major step towards addressing Pune’s current and future requirements for fully integrated residential-commercial convenience
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