The Budget 2023-2024 is likely to include several reforms and advances for the Indian real estate industry.
Like always, the real estate sector is betting big on this year’s budget for revival of fortunes, and is looking for policies and reforms that will give it a further boost. Thankfully, the sector – particularly the housing segment – has already done well in the year gone by and is most likely to shine in 2023 as well.
Industry experts believe the Indian economy will continue its growth momentum and both services and manufacturing sectors are witnessing a strong and resilient growth rate. In line with this northward trajectory in the overall economy, the real estate sector would also do well.
“The buoyancy which we have witnessed in the realty sector in the past few years is set to continue in the near term. Despite the headwinds in the global economy along with the inflationary pressure, the challenges are unlikely to impact the housing sector in India in the near term. The upcoming budget hopefully will provide home owners further relief by giving more interest subsidies on taxation,” says Ankur Gupta, JMD, Ashiana Housing Ltd.
Vivek Singhal, CEO of Smartworld Developers, says, “The Budget 2023-2024 is anticipated to include several reforms and advances for the Indian real estate industry. A major boost could be the exemption of 100% of interest paid on home loans under Section 24, potentially leaving more investible surplus in the hands of customers. Considering the rise in prices of key raw materials, we also look forward to the reduction in GST on under-construction projects in the Union Budget 2023-2024, along with the long pending demand of giving the ‘infrastructure status’ to the sector, which will attract investment from large sovereign and pension funds who currently enjoy tax exemption on investments in infra projects.”
The lack of funding alternatives has also been a hurdle for the sector. This has been a significant obstacle for the business, since it has hindered the capacity of developers to undertake new projects and satisfy the nation’s housing needs. In the past, the government has made several measures to solve these challenges. It has also eased restrictions on foreign direct investment (FDI) in the real estate sector, enabling developers to get financing from international investors.
Aman Nagar, JMD of Paras Buildtech, says, “As the budget approaches, the real estate sector hopes to see several key issues addressed. One key expectation is an increase in the tax rebate on housing loan interest under Section 24 of the Income Tax Act, which could help offset the negative impact of rising interest rates on the sector. Another key expectation is an increase in the income tax threshold for individuals, which would provide additional financial relief for those affected by the rising interest rates. Additionally, the sector is hoping for progress on long-standing demands for single-window clearance and industry status. Overall, the sector is optimistic that the forthcoming budget will address these key issues and help support its growth and development.”
Shashank Vashishtha, Executive Director, eXp India, says, “The government is expected to propose steps to encourage the development of luxury housing, such as relaxing Foreign Direct Investment (FDI) regulations and introducing tax breaks for developers and buyers. Overall, the 2023–2024 budget is expected to bring about positive changes for the Indian real estate market, focusing on housing and steps to improve the ease of business in the industry. These advancements are expected to contribute to the sector’s and the economy’s overall growth.”
It may be noted that the RBI has raised its benchmark lending rate by 225 basis points in five successive rises since May 2022 to combat persistently high inflation and, most recently, to halt the rapid decline of the Indian rupee. However, the continuous hike in the repo rate, which is now 6.25%, would unquestionably have an impact on home affordability.
Pradeep Aggarwal, Founder & Chairman, Signature Global (India), Ltd, says, “With interest rates rising, a lot depends on the upcoming Budget 2023 to support and sustain the housing demand. The government should rationalize GST rates for construction materials like steel, cement and tiles. Additionally, the government should put aside more funds under the stress fund SWAMIH. Policies should be relaxed, or scope of policy should be widened so that stuck projects could be completed.”
The government has already made affordable housing its top priority. The sector hopes that providing more subsidies and incentives would further increase the demand for affordable homes.
“We expect the maximum tax rate of 30% should be reduced to 25% to improve the buying power of individuals and interest rate saving cap should be increased. We are optimistic that the government would shape its policy actions to promote real estate demand even further this year. We expect that future announcements on repo rates and other measures/policies will have a beneficial long-term impact,” says Santosh Agarwal, CFO and Executive Director, Alpha Corp.