Budget 2024: Affordable housing boost, more incentives on realty sector’s wish list

Finance Minister Nirmala Sitharaman is set to table the full budget for FY 2024-25 late this month and the stakeholders across industries and sectors are hopeful for favourable announcements. The real estate sector hopes that she will announce measures to give a boost to the affordable housing segment, which has been struggling since the outbreak of the Covid-19 pandemic, unlike the premium homes that have been witnessing unusually high demand.

There are strong expectations that the affordable housing segment could get a significant focus in Prime Minister Narendra Modi’s third term and the first full budget of the new government will propose measures to prop up demand for the segment.

Even before the Union Budget 2024, the new cabinet, shortly after taking charge in June, announced plans to provide assistance for the construction of an additional three crore rural and urban houses under the Pradhan Mantri Awas Yojana (PMAY).

Moreover, the Ministry of Housing and Urban Affairs recently said the PMAY (urban) scheme, which was launched in 2015 to provide affordable housing to the urban poor, will be revamped to incorporate the learnings of the last nine years to make it more effective.

As the government appears committed to keeping its focus on providing affordable houses to the needy, industry watchers anticipate announcements aimed at giving a boost to the sector in Sitharaman’s Budget speech.

What does the realty sector expect?

The real estate sector is witnessing a contrasting trend in the premium and affordable housing segments. While premium housing is selling like hotcakes, the affordable housing segment is struggling to see demand.

According to real estate consultancy Anarock Research, the sales share of affordable housing has come down significantly after the pandemic. The sales share of the segment declined from over 38% in 2019 to 26% in 2022. It fell even further as in Q1 of 2024, the segment’s demand stood at nearly 20%. The affordable housing segment’s share of the overall housing supply in the top 7 cities came down significantly to 18% in the first quarter of 2024, from nearly 40% in 2019.

The real estate sector expects the government to take three key steps to rejuvenate the affordable housing segment:

Tweak the definition of affordable housing

The basic definition of affordable housing, according to the Ministry of Housing and Urban Affairs, is a house having a carpet area of up to 90 sq m in non-metropolitan areas, and 60 sq m in major cities with a value of up to ₹45 lakh.

Reportedly, real estate players want the government to revisit this broad categorisation and consider city-specific market dynamics. The main issue is with the price as it is low for cities like Mumbai where real estate prices are higher in comparison to other cities in India.

If the government decides to revisit the definition of affordable housing, more houses will qualify for this tag which will benefit buyers as they will be able to avail lower GST rates and other government subsidies.

Tax Holiday and other incentives for affordable housing developers

Industry experts say the re-introduction of a 100% tax holiday on the construction of affordable housing will incentivise builders and proliferate the supply of such housing.

Besides, industry experts also expect the government to revive the Credit-Linked Subsidy Scheme (CLSS) under PMAY, which can potentially increase the demand for affordable housing significantly.

Increase corpus for SWAMIH Fund

There are also expectations that the government will increase the allocation and introduce the second tranche of the SWAMIH (The Special Window for Affordable and Mid-Income Housing) fund with a corpus of ₹50,000 crore in budget 2024. This will facilitate the completion of stalled projects by ensuring adequate liquidity.

Apart from the industry-specific measures, a rebate in income tax rates, additional benefits on home loans, and steps to incentivise developers for the construction of these homes will be some of the positive steps to give a much-needed boost to the segment.