Anuj Puri, Chairman – ANAROCK Group
In 2023, the residential real estate market experienced extraordinary growth, as new launches and home sales reached record highs. In 2023, sales of housing in the top seven cities reached an all-time high of about 4.77 lakh units, while sales of newly launched homes reached almost 4.46 lakh units.
The real estate industry's outlook for 2024 is currently positive, but the results of the upcoming general elections will also have a significant impact on the demand for and growth in residential real estate.
The real estate industry invariably presents the Finance Ministry with a very ambitious wish list every year before the annual Union Budget. Industry status for the housing sector and single-window clearance for housing projects are standard asks and remain in place this year, as well.
Since the pace at which the issues that the real estate sector faces get resolved is generally quite slow, these expectations haven’t changed much – though they’re as pressing as ever. That said, we must have reasonable expectations for the interim budget, which will be unveiled before the general elections.
- Maximum deduction for home loans (u/s 24)
It is necessary to increase the Section 24 of the Income Tax Act's INR 2 lakh tax rebate on home loan interest rates to at least INR 5 lakh. Doing so could stimulate a more robust market for housing, particularly in the budget homes segment, which has seen a decline in demand since the pandemic.
- Decisive boost for affordable housing
Given how badly the epidemic affected this segment's target audience, affordable housing has been affected severely. ANAROCK Research finds that the previously much-touted budget homes category saw a decline in overall sales – to approximately 20% in 2023 from over 30% in 2022, and nearly 40% in the period before to the pandemic.
Not surprisingly, this segment's percentage of the total housing supply in the top 7 cities also fell to 18% in 2023 from nearly 40% in 2019.
Several interest stimulants that were offered to developers and consumers in this market over the years have expired in the last one to two years. It is imperative to revive and extend significant benefits, such as tax breaks, to encourage developers to construct more affordable housing and to make it possible for customers to acquire such homes.
- Modify the qualifying standards for affordable housing to make more buyers eligible for the additional deductions.
The Ministry of Housing and Urban Poverty Alleviation defines affordable housing as being determined by the buyer's income, the size of the property, and its price. Affordable housing is defined as a house or apartment valued up to INR 45 lakh, with a carpet area of up to 90 square metres, located in non-metropolitan cities and villages, and 60 square metres in large cities.
The definition provided by the central bank, however, is based on the loans that banks provide to individuals so that they can purchase apartments or build houses.
The government needs to take a hard look at adjusting the qualifying cost of properties within cities’ affordable housing segment. Although the units' defined size of 60 square metres is reasonable, the prices of up to INR 45 lakh make them unaffordable to a huge share of the target clientele.
For example, a budget of <INR 45 lakh is irrelevant for a metropolis like Mumbai; it should be increased to at least INR 85 lakh. The budget should be raised to at least INR 60–65 lakh for other large cities. With this price adjustment, more homes will be within the reach of more buyers, who will be able to take advantage of other advantages such government subsidies, reduced GST rates at 1% without ITC, etc.
- Release government land for affordable housing
Addressing the land shortage for this vital housing segment is also necessary. Certain lands that are owned by Indian Railways, Port Trusts, Department of Heavy Industries, etc., may be released by the corresponding government agencies. When this land is released at low cost specifically for affordable housing, it will also significantly lower real estate prices overall.
