As the Union Budget is set to be presented on 23 July, the real estate sector is brimming with anticipation for enhanced financial inclusion measures to sustain its growth. Industry leaders have outlined several expectations aimed at invigorating demand, boosting supply, and fostering a sustainable environment for real estate development.
Anuj Puri, Chairman of ANAROCK Group, has proposed the revival of the Credit-linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY). This scheme, which expired in 2022, provided subsidies for Economically Weaker Sections (EWS) and Low-Income Groups (LIG) purchasing affordable homes. Puri emphasised that reviving this scheme would once again stimulate demand among first-time homebuyers.
Previously, CLSS was available for new constructions and upgrades to existing dwellings, as well as converting ‘kaccha’ homes to ‘pucca’ ones under PMAY (Rural). Puri said, “This scheme for EWS/LIG, which expired in 2022, should be revived to incentivise first-time buyers of affordable homes across cities. This will once again invigorate demand in this segment. Subject to criteria specified under government guidelines, CLSS was previously available for housing loans to EWS/LIG buyers in new constructions, and for the addition of rooms, kitchen, toilet etc. to existing dwellings. Also, under PMAY (Rural), one could avail of this subsidy for all ‘kaccha’ homes being converted into ‘pucca’ ones, provided they fulfil the eligibility criteria.”
To incentivise developers, Puri suggests reinstating the 100% tax holiday under Section 80-IBA of the Finance Act, 2016. This tax relief on profits earned from affordable housing projects would significantly boost supply and encourage more developers to enter the affordable housing market.
The definition of affordable housing, based on property size, price, and buyer’s income, requires an overhaul. Puri advocates increasing the price cap from ₹45 lakh to ₹85 lakh in Mumbai and to ₹60-65 lakh in other major cities. This adjustment would align with market dynamics, allowing more homes to qualify as affordable and enabling buyers to access lower GST rates, government subsidies, and other benefits.
The current GST rate of 12% without input tax credit (ITC) is seen as a deterrent for buyers of under-construction properties. The sector is urging the government to either reduce this rate or reinstate ITC, which would make these properties more attractive and affordable.
Introducing a single-window clearance system for all real estate projects could significantly reduce project delays and enhance ease of doing business. This system would streamline approvals and clearances, minimising bureaucratic hurdles.
Enhancing tax benefits under Section 24(b) (interest on home loan) and Section 80EEA (additional deduction for interest on home loans for first-time buyers) would make home loans more affordable. Increasing the deduction limits under these sections would encourage more investments in real estate, particularly in the affordable housing segment.
Promoting green and sustainable housing through tax incentives and subsidies could address environmental concerns while fostering innovation in the construction sector. This could include tax rebates for developers adopting eco-friendly practices and buyers investing in energy-efficient homes.
Granting infrastructure status to the real estate sector would enable developers to access funds at lower interest rates and avail other financial benefits. This status would streamline regulatory processes and improve overall project viability.
The hospitality sector is also looking forward to the Union Budget with hopes for tax reductions, infrastructure development, and upgraded tourism promotion. The industry seeks reduced GST, funding for skills development, and incentives for sustainable tourism. Granting industry status to hospitality would simplify rules, provide tax breaks, and facilitate better access to capital, driving growth in this vital sector.
Anshuman Magazine, Chairman & CEO, India, South-East Asia, Middle East & Africa, CBRE has recommended increasing the tax deduction limit from ₹1.5 lakh to ₹4 lakh per annum and moving it out of Section 80C. He also suggests reintroducing tax incentives for real estate investment trusts (REITs) and reviving the additional I-T deduction under Section 80EEA for first-time homebuyers.
Magazine said, “With the rising prices of residential units, we recommend increasing this limit of ₹1.5 lakh per annum to at least ₹4 lakh per annum. Also, 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.
He added, “The exemption limits provided under Sections 80 C and Section 24 B of the I-T Act have remained stagnant for a long time and have not been indexed to inflation. The government can also introduce tax incentives under Section 80C for real estate investment trust (REIT) investors. This would enable REITs to emerge as an attractive tax-saving instrument, further encouraging prospective investors.”
Magazine advocates reducing the capital gains tax rate from 20%, lowering the holding period for properties from 24 to 12 months, and removing the ₹2 crore cap on capital gains for reinvesting in two properties. Additionally, extending the completion period for under-construction properties by at least a year would provide cushioning against labour and material disruptions.
He also recommends expanding the criteria for affordable housing to make the scheme more inclusive, particularly for metro cities where higher unit sizes and prices are necessary.
