Budget 2024: Increased allowable house loan deductions and industry standing on the real estate priority list

Stakeholders anticipate measures in the February 1 budget that will assist homeowners due to the recent spike in property prices.

The real estate industry is hopeful that the 2019 budget, which Finance Minister Nirmala Sitharaman will review, will take into account their long-standing demands for increased home loan deduction limits, a revised definition of affordable housing, and industrial status for the sector.

Real estate stakeholders are hopeful that some of their demands will be granted, despite the finance minister's statement that there won't be "spectacular announcements" when he presents a vote-on-account or interim budget on February 1.

Deductions for interest on a house loan

An important anticipation is a rise in the Section 24B deduction cap for house loan interest payments, which has been fixed at Rs 2 lakh per year since 2014.

Raising the present tax credit of Rs 2 lakh on home loan interest to a minimum of Rs 5 lakh is one of the main goals. Piyush Bothra, co-founder of Square Yards, stated, "This adjustment is crucial to bolster housing demand, especially within the affordable housing segment."

This demand is justified by rising real estate costs, which have forced buyers to take out larger loans.

We suggest raising the tax credit on house loan interest in reaction to the recent rise in real estate values. According to Dhruv Agarwala, group CEO of Housing.com, Proptiger.com, and Makaan.com, "raising the current limit from Rs 2 lakh to Rs 4 lakh could be a game-changer, helping to sustain the current strength in demand."

Metros' limits on affordable housing

When purchasing a home, affordability is still a major concern. Numerous government initiatives supporting affordable homebuyers have come to an end. Experts recommended that in order to revitalise this important market, the government think about announcing or restoring incentives.

Sales in the much-discussed budget category dropped to roughly 20% in 2023 from over 30% in 2022 and nearly 40% prior to the pandemic, according to ANAROCK Research. In the top seven cities, the share of housing supply in this category decreased from almost 40% in 2019 to 18% in 2023.

"Over the past one to two years, a number of interest stimulants that were provided to consumers and developers in this sector have expired. Anuj Puri, chairman of ANAROCK Group, stated, "It is essential to revive and extend significant benefits like tax breaks to encourage developers to construct more affordable housing and to make it possible for customers to acquire such homes."

Furthermore, there's a need to revise the definition of affordable housing to reflect the state of the market today.

"Standardization of affordable housing definitions across government and financial institutions will help buyers avail maximum available benefits, including credit-linked subsidies," stated Vimal Nadar, senior director of research at Colliers India, echoing the idea.

A nationwide price ceiling to be considered affordable housing, according to experts, is inappropriate.

For a city the size of Mumbai, a budget of Rs 45 lakh is insufficient; it must be raised to at least Rs 85 lakh. For other major cities, the funding should be increased to at least Rs 60?65 lakh. More homes will be affordable for more buyers thanks to this price adjustment, and they will also be eligible for additional benefits, including government subsidies and lower GST rates at 1% without the need for an input tax credit, according to Puri.

According to Bothra, the bar for affordable housing ought to be raised to Rs 75 lakh or higher, particularly in urban areas like Mumbai.

Industry Standing

The granting of industry status to the real estate sector has been a longstanding demand from supply-side stakeholders. This would facilitate processes for developers and provide additional benefits.

"It's critical to take a comprehensive strategy that addresses underlying issues in addition to advocating for affordable housing. Agarwala stated, "This includes establishing a simplified single-window approval system and awarding industry status.

Simplifying the capital gains tax

Another issue that requires rationalization is capital gains tax.

It is suggested that the current 20 percent capital gains tax be lowered. Bothra stated that by taking this action, investments will be encouraged, leading to greater economic growth and stability.

Currently, different capital asset types are subject to different capital gains tax rates.

According to Nadar, "retail investors want the capital gains structure to be even more simplified."