Budget 2024: Will affordable housing finally get the boost it needs? Key expectations from the real estate sector

With the Union Budget 2024-25 to be presented in July, the real estate sector is pinning new hopes on the Modi 3.0 regime.

“Expectations of tax relief and other sentiment-boosting measures are high. The future of the overall industry also depends on seamless infrastructure deployment to support and improve urban living standards, as well as develop and promote new sectors,” said Anuj Puri, chairman, Anarock Group, in a recent budget expectations note.

Puri questioned whether the government would finally grant industry status to the entire housing sector and take adequate measures to revive the affordable housing segment, which has been in a steady decline since the pandemic.

According to the report, the Indian housing sector has remained bullish so far in 2024, with housing sales and new launches hitting new peaks across the top 7 cities. Sales in FY23-24 reached an all-time high with nearly 4.93 lakh units sold, while 4.47 lakh units were launched.

However, Puri emphasised that the current growth momentum in the housing sector is strong, but it is largely tilted towards mid-range and premium housing. He highlighted that this trend may not sustain if affordable housing continues to lag, given the specific needs of India’s lower-income groups.

According to Anarock Research, the share of affordable housing sales has declined significantly post-Covid-19, falling from over 26 per cent in 2022 and over 38 per cent in 2019 to around 20 per cent in Q1 2024. The segment’s share in total housing supply across the top seven cities also declined to 18 per cent in Q1 2024 from around 40 per cent in 2019 due to low demand.

Puri said many incentives previously offered to buyers and developers of affordable housing have expired in the last two years. To revive this important segment, high-impact measures such as tax exemptions for developers and buyers are needed to focus on affordable housing and improve affordability.


Additional measures to revive affordable housing could include:

Credit-linked subsidy scheme under PMAY: According to Puri, the scheme for EWS/LIG, which expired in 2022, should be revived to incentivise first-time buyers of affordable homes in cities, thereby boosting demand in this segment. Earlier, CLSS was available to EWS/LIG buyers for housing loans for new construction and for adding rooms, kitchens and toilets to existing dwellings, subject to government guidelines. Under PMAY (rural), subsidy was also available for converting ‘kutcha’ houses into ‘pukka’ houses, provided they met the eligibility criteria. Reviving this scheme will boost demand in the affordable housing sector.

Reintroduce 100 per cent tax holiday for affordable housing developers: Puri also pointed out that to boost supply and encourage developers to build more affordable housing, the government may reintroduce the ‘100 per cent tax holiday’ benefit previously enjoyed by them under Section 80-IBA in the Finance Act, 2016. This section provided major tax relief on profits earned from developing and constructing affordable housing projects.

Change definition of affordable housing criteria to extend additional deduction benefits to more buyers: According to the Ministry of Housing and Urban Poverty Alleviation, affordable housing is defined based on the size of the property, price and income of buyers. Specifically, it includes houses or flats with carpet area up to 90 sq m in non-metropolitan cities and towns and houses or flats up to 60 sq m in major cities, priced up to ₹45 lakh. In contrast, the central bank defines affordable housing based on the loans banks give for building or buying homes, Puri said. dfsdfds

The government should seriously reconsider revising the prices of homes within the affordable housing budget to reflect city-specific market dynamics. He said the unit size of 60 sq m as per the current definition is reasonable, but a price ceiling of Rs 45 lakh is not viable in most cities.

For example, a budget of less than Rs 45 lakh in Mumbai is unrealistic and should be increased to at least Rs 85 lakh. The budget should be increased to at least Rs 60-65 lakh in other major cities. These revisions will enable more homes to qualify as affordable, allowing more buyers to benefit from lower GST rates at 1 per cent without ITC, government subsidies and other incentives.

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