As India prepares for Finance Minister Nirmala Sitharaman’s 6th Union Budget, set to be presented on February 1, 2024, all eyes are on the real estate sector, especially for affordable housing. The government's goal of 'Housing for All' has prompted experts and industry leaders to share their expectations, calling for key measures to boost affordable housing.

Suggestions include revisiting GST rates, providing tax deductions, allocating land, and increasing funding. The upcoming budget is seen as an opportunity to strengthen the real estate sector's pivotal role in India's economic growth.

Recent reports show a positive trend in the EMI-to-income ratio for households in major Indian cities since 2019, with further improvement in 2023 compared to the previous year. This means a smaller portion of monthly income is now spent on mortgage payments, making homeownership more attainable for a larger section of the population.

Experts Call for Key Measures in the Housing Sector

The National Real Estate Development Council (NAREDCO) has proposed a significant step towards addressing housing needs by urging the finance ministry to allocate ₹50,000 crore to the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund in the upcoming Union Budget 2024-2025.

Industry experts suggest that granting industry status to the residential sector could yield financial benefits and streamline project approvals.

Another expert recommends revising the cap on affordable housing, currently set at ₹45 lakh, citing rising inflation and escalating commodity costs. Increasing this limit could attract more buyers and support the government's 'Housing for All' initiative.

Advocating for increased allocation to the Pradhan Mantri Awas Yojana (PMAY), experts emphasize its potential to stimulate economic activity in rural areas. The allocation rose from ₹48,000 crore in FY23 to ₹79,000 crore in FY24, indicating robust demand in rural housing.

In 2023, housing sales in major cities reached a record high, signaling a positive trend in the residential real estate sector. To further bolster this growth, experts suggest expanding tax incentives, including extending deductions on principal repayments to second-home buyers and tying interest exemptions on home loans to inflation-adjusted costs.

To promote affordable housing, experts propose implementing a uniform 1% stamp duty rate nationwide and providing tax holidays and land allocations for the development of affordable housing units.

Increasing tax rebates for home loan interest under Section 24 of the Income Tax Act is a significant proposal. The suggestion to raise the current limit from ₹2 lakh to ₹4 lakh could have a substantial impact, maintaining the strong demand we are currently experiencing.

Similarly, reducing GST rates in the real estate sector could make homes more affordable and stimulate demand, as experts suggest.

Experts also propose adjusting the budget for metro cities to around ₹70-75 lakh, which would widen access to homes for more buyers. This change could allow buyers to take advantage of government subsidies and reduced GST rates.

Releasing government-owned land for affordable housing is also seen as crucial to address the shortage of land in this sector and potentially lower real estate prices overall.

It is important to keep in mind the goal of "Housing for All" as envisioned by the prime minister, which aims to boost both the supply and demand sides of the housing market.

As the Interim Budget approaches, no major announcements are expected due to the upcoming Lok Sabha elections.

"The full budget for the fiscal year 2024-2025 will be disclosed in July, once the new government is in place. It's unlikely that policies aimed at boosting market confidence and giving the economy an extra push will be introduced in the February 1 budget," stated another expert.

There are expectations for increased spending in the PM Awas Yojana to drive urban infrastructure development. The government aims to improve regional air connectivity by revitalizing more airports, helipads, and water aero drones, in addition to building roads, railways, ports, and highways.

To sustain growth and attract buyers, the government is expected to introduce schemes and incentives, particularly benefiting the affordable housing market in rural and semi-urban areas, as per another industry expert.