Strategic Solutions: Crafting Affordable Housing Amid Shifting Real Estate Markets

In 2023, the real estate sector witnessed accelerated growth across major and minor cities, marked by a surge in new property launches and absorption rates of existing units. Premium apartment segments, in particular, experienced significant volume increases, indicating a positive outlook for the current year, albeit with a few challenges.

However, amidst this optimistic backdrop, the residential property market witnessed a notable risein prices, coupled with a decline in demand for home loans. Over the past three years, average housing prices surged between 13-33% across seven major cities, while the share of home loans in Bank’s retail advances dwindled. This downward trend in home loans is attributed primarily toescalating property costs and elevated interest rates, posing affordability challenges for middle-income citizens.

The previous year’s budget, lacking specific incentives or regulatory reforms for the real estate sector, cast a shadow. Nevertheless, the government’s increased allocation for the PM Awas Yojna and focus on urban development, with substantial investments in infrastructure, offered a silverlining. These initiatives are viewed positively, expected to spur economic growth and benefit various real estate segments. Additionally, the development of mega projects aimed at new city constructions promises transformative opportunities for residents, fostering economic and social development akin to major cities.

Addressing the imperative need for affordable housing, there’s a discernible shift in developer’s focus, given rising construction costs. A comprehensive approach is advocated, extending beyond affordable housing promotion to tackle fundamental sectoral issues. This includes granting Industry status and implementing a streamlined single-window clearance system. Such measures can foster an environment conducive to affordable housing development, while key reforms like reducing premiums and expediting approvals are essential. Prioritizing quality standards for affordable housing can further encourage eco-friendly materials and construction practices.

Furthermore, there’s a growing demand to revise the definition of affordable housing to reflect current market dynamics. Standardizing definitions across government and financial institutions would facilitate maximum benefit utilization, including credit-linked subsidies.

Stable tax regimes play a pivotal role in bolstering homebuyer confidence and driving purchasing decisions. Homebuyers, particularly in the mid-range segment, heavily rely on home loans, making tax benefits under Section 80 a crucial incentive. However, the non-extension of these benefits has left a void, prompting calls for their reinstatement. Additionally, amidst escalating housing prices, There’s a growing demand to increase the tax rebate on home loan interest under Section 24 of the Income Tax Act.

Furthermore, there’s a plea for the rationalization of capital gains tax, with proposals to reduce the prevailing 20% tax rate to incentivize housing investments. Addressing tax burdens stemming from notional income on unsold properties held as stock-in-trade is also imperative. Amendments to Section 23(5) to either abolish notional income or extend timelines for its consideration are sought tto provide relief to developers and homebuyers alike.

Reviving stalled projects remains a pressing concern, with countless homebuyers awaiting the completion of projects mired in limbo. While initiatives like RERA and IBC have offered some respite, collaborative efforts among ministries, state governments, and local authorities are needed to implement recommendations aimed at reviving stalled projects.

In anticipation of the upcoming budget, homebuyers are hopeful for several key measures. These include increasing the tax slab for interest rate deduction under Section 24(b) of the Act, extending tax benefits under Section 80, revising the CLSS cap to reflect current market realities, introducing tax benefits for first-time homebuyers, implementing GST with input tax credit on under- construction properties, and infusing funds to revive stalled projects. These initiatives are essential to fulfill the aspirations of millions of aspiring homeowners and bolster the real estate sector’s contribution to India’s socio-economic development.