REAL ESTATE BUDGET 2024 EXPECTATIONS
Its again that time of the year, when we anxiously await the budget announcement for the year, hoping to get over the disappointments of the last year. 2024 being an election year, we will see an interim budget this February, followed by a detailed one post-elections by the winning party. While interim budgets are usually an exercise in policy restraint, it does set the stage for the full Budget. And this year, the expectations of the real estate sector are already riding high, given the upcoming budget having the potential to provide further momentum to the sustained growth of the sector till now. Taxation reforms, GST revision, infra- structure development, affordable hous- ing boost, industry status remain the popular demand of the real estate sec- tor. In addition, simplifying regulations, ease of doing business, enhancement in financing and encouraging home buying activities are some of the provisions, the sector hopes the upcoming budget will accommodate. EMPHASIS ON HOUSING The real estate industry bodies expect the Government to take decisive actions in the upcoming budget to fortify real estate, the second-largest sector that provides employment and contributes to over 8% of the national GDP. An increase in the cap for in- terest rate deduction under section 24(b) from Rs. 2 lakh to Rs. 5 lakh per annum, redefining the definition of affordable housing with an increase in the cap from Rs. 45 lakh to Rs. 1 crore, particularly in metro cities, is expected to significantly boost both affordable and mid-segment housing. The industry also anticipates the continuation of incentives for affordable rental housing schemes. Tax reliefs for such projects could accelerate investment and aid in achieving the Government's ambi- tious 'Housing for All' goal. Further expectations include tax benefits for first-time homebuyers and the re-introduction of GST with an input tax credit on under-construction properties. These measures are anticipated to stimulate demand among homebuyers. Other suggestions include tax reliefs to fuel significant growth in the real estate sector, single window clearance, and reduced home loan interest rates. The reintroduction of subvention schemes is also on the wish list, which would assist home- buyers in aligning their payments and encourage home buying decisions. There's a call for an increase in the SWAMIH stress fund and the creation of a second tranche with a corpus of Rs 50,000, aimed at completing stalled realty projects and ensuring adequate liquidity. A long-standing demand of the sector has been the granting of ‘in- dustry status’ to real estate. This year, there is a hopeful anticipation that the Government will address this issue, say the real estate players. CONTINUED FOCUS ON INFRASTRUCTURE Infrastructure development is expected to remain the key focus in the upcoming budget, with continued fund allocation. The real estate hopes for budgetary allocations to other crucial infrastructure projects such as multimodal logistic parks, industrial corridors, ports, inland waterways, expressways and suburban railway systems through private participation. Additionally, there is a concerted de- mand for fast-tracking development of smart cities and intra-city infra- structure, which will ultimately provide a supportive business environment to Tier II locations of the country. These measures are considered crucial for maintaining the sector's positive momentum. Moreover there is a need for increased allocation for infrastructure enhancement pan-India and warehousing con- nectivity. With the surge in e-com- merce, enhanced connectivity for warehousing facilities is pivotal for streamlining the movement of goods, reducing transit times, and optimizing logistical operations. A strategic allocation towards road and rail connectivity, coupled with modernization initiatives such as dedicated freight corridors, will not only ease congestion, but also enhance the overall efficiency of the supply chain. ALTERNATIVE INVESTMENTS & ALTERNATE ASSET CLASSES The alternative investment and commercial real estate companies are keenly anticipating reforms in long-term capital gains taxation. With the current 20% tax rate after indexation on real estate for holdings beyond 24 months, they advocate for more favorable policies to encourage investment. There is also an expectation of raising the 80C tax deduction limit to Rs 2.5 lakh, which could greatly benefit taxpayers. For real estate assets such as Co-living, Senior Living, and Student Living, the GST benefits like in the hospitality industry, could be a real boost for growth in the sector. Granting infrastructure sta- tus to commercial real estate can provide access to long-term funding at a more affordable rate, including foreign currency funding through the external commercial borrowing route, infusing substantial energy into the market. Extending tax benefits to specif- ic asset classes within commercial real estate will also encourage a push for increased investment with more retail participation. Ina addi- tion, for commercial properties, en- hancing deduction limits for repair and maintenance expenses, along with depreciation rates, would be a positive step, as per the industry. SUSTAINABILITY & START-UPS Recognizing the pivotal role of startups in driving innovation, job creation, and economic growth, the proptech companies eagerly anticipate a budget that fosters a thriving entrepreneurial ecosystem. Startups are eyeing streamlining of tax and regulatory frameworks, policy directions particularly regarding carry-forward losses and employee stock options, establishment of specialized funds and government's focus on regulations governing crowdfunding and angel funding platforms to align with international standards. Recognizing the vital role EVs play in fostering a cleaner and greener future, there is also a hope for strategic policy measures and financial support that will not only accelerate the adoption of electric vehicles but also introduce significant incentives for the establishment of Electric Vehicle (EV) charging stations nationwide. Extension of benefits under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme will be pivotal in promoting sustainable growth by providing subsidies for the pur- chase of EVs, alongside mandating EVs in public transport, logistics, and delivery sectors. Some of the other recommendations of the sec- tor are increasing investments in green infrastructure, like renew- able energy and tax incentives for developers to obtain green certifications. THERE IS A WISH OF RENEWING THE INCENTIVES FOR DEVELOPERS AND CONSUMERS THAT EXPIRED IN THE PAST ONE TO TWO YEARS. MEASURES, SUCH AS TAX BREAKS FOR AFFORDABLE HOUSING DEVELOPMENT AND ACQUISITION, ARE SEEN AS CRUCIAL FOR THE SECTOR'S CONTINUED VITALITY. GIVEN THE CURRENT PERFORMANCE OF THE RUPEE, THE FORTHCOMING BUDGET COMES AT AN OPPORTUNE TIME TO PROVIDE FOR REFORMS TARGETED AT FOREIGN CAPITAL INFLOWS, INCLUDING ANTICIPATED REDUCTIONS IN INTEREST INCOME TAX AND LIBERALIZATION OF FOREIGN INVESTMENT NORMS IN THE REAL ESTATE SECTOR. THERE IS A HOPE FOR ANNOUNCEMENT OF KEY LONG- TERM MEASURES TO KEEPING INFLATION UNDER CHECK THAT WILL BOOST CONSUMPTION AND DEMAND FOR REAL ESTATE. AND IT CAN BE BEST ACHIEVED BY REDUCING THE TAX BURDEN THROUGH RECONSIDERING TAX SLABS AND INCREASING THE STANDARD DEDUCTION. THERE ARE ALSO HOPES FOR LIMITING INCREASE FOR LONG- TERM CAPITAL GAINS, 80C EXEMPTIONS, AND SIMPLIFYING TAX STRUCTURES ON VARIOUS INVESTMENT INSTRUMENTS TO HELP IMPROVE DIVERSIFICATION.
Tags : ALTERNATIVE INVESTMENTS ALTERNATE ASSET CLASSES Hybrid Electric Vehicles GST benefits BUDGET BOOST CONSUMPTION Co-living Senior Living Student Living modernization