In the last few years, the real estate sector in India has seen robust growth across various asset classes. All thanks to the changing buyer preferences and favorable economic conditions. As the Union Budget 2024 is set to be presented by Finance Minister, Nirmala Sitharaman, in the upcoming week, real estate experts are eyeing on policy measures that could determine industry’s trajectory and the likely outcome for the next few years. 

If we take the stats into account, the real estate sector has been on upswing across all the segments during H1 2024. While commercial and residential sectors saw a steady growth, institutional investments remained sturdy, showcasing positive business sentiments. 

According to the reports, office leasing activity in six major markets of the country reached 30 msf. in the first half of 2024, almost 20% higher than the corresponding period in 2023. Furthermore, stable interest rates, moderate inflation, and high-frequency economic indicators have fueled the demand growth in major realty verticals.

If the Union Budget 2024 meets the expectations of all the stakeholders, it can serve as a turning point that contributes significantly to the sector’s potential to reach $1 trillion by 2030. Several industry experts believe the government should make focused announcements on housing, infrastructure, affordability & liquidity enhancement, taxation reforms and regulatory simplifications.

Having said that, let’s talk about homebuyers’ expectations from this year’s budget. 

Homebuyers’ Wishlist for Union Budget 2024 

• Separate and higher deduction for home loan principal payments (up to Rs 5 Lakhs), which is now capped at INR 150,000 under Section 80C.
• In the case of self-occupied property, the limit on tax deduction for interest paid should be raised from the current Rs 2 lakhs to around 4-5 lakh.
• Standardization and rationalization in “Affordable Housing” criteria across government schemes and financial institutions can help eligible homeowners in qualifying for desirable financing choices in the particular category.
• Need tax exemption on rental income to boost housing demand. 

Developers’ Expectations from Budget

• GST reductions on essential materials such as cement, steel, and aluminium will help to keep project costs under control.
• Reintroduction of the Input Tax Credit (ITC) for under-construction properties. 
• 100% tax exemption on affordable housing projects under Section 80IBA needs to be reinstated.
• Increased funds allotment through the Special Window for Affordable and Mid-Income Housing (SWAMIH) investment fund to improve liquidity in strained residential developments.
• Tax reductions for green buildings can be provided to encourage more attention on sustainable construction. Green construction incentives, such as minimal alternate taxes or tax credits comparable to those used in the infrastructure sector, will be extremely helpful.
• Extension of PMAY timelines beyond December 2024. 

What’s Industrial Segment Expecting? 

Stakeholders are looking forward to favorable government policies and greater infrastructure spending to support the industrial and warehousing sectors. With the government’s constant focus on the development of multifunctional logistics parks and corridors, clear governance mechanisms and an enabling environment are critical for the effective implementation and timely completion of logistics infrastructure. An improved reliable logistics network can be crucial in meeting the growing demand for warehouses in India, particularly in Tier I and Tier II cities.

• Rationalization Import-export tariff will help India integrate into the global supply chain faster.
• GST rationalization for MSMEs throughout their early years of business. 
• To stimulate manufacturing in the country and assist the Make-In-India initiative, the concessional corporation tax rate of 15% for manufacturing startups should be extended, which expired on March 31, 2024.

Conclusion

The upcoming union budget may build on the groundwork laid over the past few years and implement concrete measures to propel the economy forward. Keeping global concerns and financial volatility in mind, comprehensive tax-rationalization initiatives that increase disposable income  can be well received by the real estate sector. Further, REITs investments can also get tax exemption which can provide a thrust to retail investors.