Union Budget 2024: Affordable housing vs premium homes - what tax relief can be expected
One possible approach to boost growth in the housing sector includes instituting a reduction in income tax rates, offering additional benefits on home loans, and creating programs to encourage developers to expand residential construction.
- Jul 12, 2024,
- Updated Jul 12, 2024 4:39 PM IST
Union Budget: The Real Estate sector, along with other sectors, is anticipating that Finance Minister Nirmala Sitharaman will introduce measures aimed at revitalising the affordable housing segment, which has faced challenges since the onset of the Covid-19 pandemic. There is a prevailing belief that the affordable housing sector may receive substantial attention during Prime Minister Narendra Modi's third term, with expectations that the initial comprehensive budget of the new government will include initiatives to stimulate demand within this segment.
Despite a surge in demand for premium homes, builders and real estate developers are hopeful for incentives and support measures. In the 2024-25 Interim Budget, FM Sitharaman unveiled a significant initiative aimed at bolstering India's affordable housing sector. This initiative involves the addition of 2 crore more houses to the flagship scheme known as PMAY-U (Pradhan Mantri Awas Yojana – Urban).
The real estate industry is currently experiencing a noticeable contrast between the premium and affordable housing sectors. Buyers are swiftly snapping up premium housing units, while the affordable housing segment is facing challenges in generating demand.
An analysis conducted by real estate consultancy Anarock Research revealed a substantial decline in the sales share of affordable housing post-pandemic. In 2019, the affordable housing segment accounted for over 38% of total sales, but by 2022, this figure had decreased to 26%. The downward trend persisted, with the segment's demand plummeting to nearly 20% in the first quarter of 2024.
Furthermore, the affordable housing sector's contribution to the overall housing supply in the top 7 cities sharply dropped to 18% in Q1 2024 from a significant 40% in 2019.
CA (Dr.) Suresh Surana said in terms of tax incentives to boost the real estate market, the government should revise Section 80C, Section 24(b), Capital gains taxation, home loan tax relief under the New Tax Regime, and others.
Besides, Surana said: "The government may prioritise affordable housing to address social needs and ensure inclusive growth. However, supporting the premium sector can also yield economic benefits through increased revenue, job creation, and infrastructure development. This approach can help foster overall growth and development in the real estate sector while addressing the country's diverse economic and social needs."
He listed some incentives that can bring relief for both the segments
Economic Housing (Affordable Housing):
> Increased Affordability: Tax incentives such as enhanced deductions under Section 80C for homebuyers, can make housing more affordable for the middle and lower-income groups. > Boosting Supply: By providing tax holidays and other incentives for developers in the affordable housing segment, the government can encourage more construction in this crucial segment where demand often outstrips supply. > Social Impact: Affordable housing is critical for addressing housing shortages and improving living conditions for a large section of the population. Tax incentives can facilitate the development of such housing projects.
Premium Homes
> Encouraging Investment: Tax reliefs can stimulate demand in the premium sector by making high-end properties more attractive to buyers and investors. This can lead to increased construction and development in this segment. > Economic Growth: The premium sector often attracts significant investment and contributes substantially to the economy through construction activities, job creation, and ancillary services. Tax incentives can further boost this economic activity. > Competitiveness: In a competitive global market, tax incentives can enable in attracting foreign investment into high-end real estate projects, enhancing overall economic growth and infrastructure development.
The government is expected to increase the allocation and introduce the second tranche of the SWAMIH fund in the 2024 budget. This move aims to facilitate the completion of stalled projects by ensuring adequate liquidity, addressing the affordable and mid-income housing crisis.
A potential strategy to stimulate growth in the housing sector involves implementing a rebate in income tax rates, providing supplementary benefits on home loans, and introducing initiatives to incentivise developers to increase the construction of residences. These measures are aimed at fostering a favorable environment for the housing market and can potentially contribute to its revitalisation.
Union Budget: The Real Estate sector, along with other sectors, is anticipating that Finance Minister Nirmala Sitharaman will introduce measures aimed at revitalising the affordable housing segment, which has faced challenges since the onset of the Covid-19 pandemic. There is a prevailing belief that the affordable housing sector may receive substantial attention during Prime Minister Narendra Modi's third term, with expectations that the initial comprehensive budget of the new government will include initiatives to stimulate demand within this segment.
Despite a surge in demand for premium homes, builders and real estate developers are hopeful for incentives and support measures. In the 2024-25 Interim Budget, FM Sitharaman unveiled a significant initiative aimed at bolstering India's affordable housing sector. This initiative involves the addition of 2 crore more houses to the flagship scheme known as PMAY-U (Pradhan Mantri Awas Yojana – Urban).
The real estate industry is currently experiencing a noticeable contrast between the premium and affordable housing sectors. Buyers are swiftly snapping up premium housing units, while the affordable housing segment is facing challenges in generating demand.
An analysis conducted by real estate consultancy Anarock Research revealed a substantial decline in the sales share of affordable housing post-pandemic. In 2019, the affordable housing segment accounted for over 38% of total sales, but by 2022, this figure had decreased to 26%. The downward trend persisted, with the segment's demand plummeting to nearly 20% in the first quarter of 2024.
Furthermore, the affordable housing sector's contribution to the overall housing supply in the top 7 cities sharply dropped to 18% in Q1 2024 from a significant 40% in 2019.
CA (Dr.) Suresh Surana said in terms of tax incentives to boost the real estate market, the government should revise Section 80C, Section 24(b), Capital gains taxation, home loan tax relief under the New Tax Regime, and others.
Besides, Surana said: "The government may prioritise affordable housing to address social needs and ensure inclusive growth. However, supporting the premium sector can also yield economic benefits through increased revenue, job creation, and infrastructure development. This approach can help foster overall growth and development in the real estate sector while addressing the country's diverse economic and social needs."
He listed some incentives that can bring relief for both the segments
Economic Housing (Affordable Housing):
> Increased Affordability: Tax incentives such as enhanced deductions under Section 80C for homebuyers, can make housing more affordable for the middle and lower-income groups. > Boosting Supply: By providing tax holidays and other incentives for developers in the affordable housing segment, the government can encourage more construction in this crucial segment where demand often outstrips supply. > Social Impact: Affordable housing is critical for addressing housing shortages and improving living conditions for a large section of the population. Tax incentives can facilitate the development of such housing projects.
Premium Homes
> Encouraging Investment: Tax reliefs can stimulate demand in the premium sector by making high-end properties more attractive to buyers and investors. This can lead to increased construction and development in this segment. > Economic Growth: The premium sector often attracts significant investment and contributes substantially to the economy through construction activities, job creation, and ancillary services. Tax incentives can further boost this economic activity. > Competitiveness: In a competitive global market, tax incentives can enable in attracting foreign investment into high-end real estate projects, enhancing overall economic growth and infrastructure development.
The government is expected to increase the allocation and introduce the second tranche of the SWAMIH fund in the 2024 budget. This move aims to facilitate the completion of stalled projects by ensuring adequate liquidity, addressing the affordable and mid-income housing crisis.
A potential strategy to stimulate growth in the housing sector involves implementing a rebate in income tax rates, providing supplementary benefits on home loans, and introducing initiatives to incentivise developers to increase the construction of residences. These measures are aimed at fostering a favorable environment for the housing market and can potentially contribute to its revitalisation.