Year 2023 saw picking up of the pace of growth of real estate across big and small cities with high number of new launches and absorption of existing units. The premium category apartments especially saw significant volume rise. This presents a rosy picture for the present year too, though there have been a few downsides also.
The residential properties saw a sharp price hike, and the home loans demand saw a sharp dip. Average housing prices have increased in the range of 13-33 per cent in the last three years across seven major cities. And, the share of home loans in retail advances of banks declined to 47.2 per cent from 48.7 per cent a year ago and 50 per cent in 2021. The costlier properties and el- evated interest rates are consid- ered to be the primary reason for this downward trend in home loans which is also indicative of the hous- ing becoming out of reach of middle-income citizens.
The previous year’s budget was a dampener for the real estate as it offered no specific incentives, policy changes or regulatory reforms. The government's augmented allocation for PM Awas Yojna and focus on ur- ban development with a substantial increase in capital investments for infrastructure was a silver lining, seen as a positive for economic growth with a ripple effect on vari- ous real estate segments. The mega projects of new cities development will usher in the re- quired change for the people of the vicinity to have similar economic, social and growth opportunities as big cities.
MAKE HOUSING AFFORDABLE
There is a diminishing enthusi asm among real estate developers to build affordable housing projects, especially following the steep rise in cost of construction. A comprehensive approach that extends beyond just promoting affordable housing to addressing fundamental issues of the sector like granting Industry status and implementing a streamlined single-window clearance system, can only help create housing for all. By creating a conducive environment for affordable housing and prioritizing key reforms such as reduction in premiums and sanctions cost, fast approvals can help bring down the cost of development, which will also motivate more devel- opers in taking up affordable hous- ing initiatives and providing people with more projects at reasonable prices. In addition, supportive policies ensuring quality standards for affordable housing will pave the way for more eco-friendly materials and construction.
Given the latent demand of housing of the burgeoning population especially among the lower and middle-income segment, it is expected the real estate growth will be driven by affordable housing sector. However, affordability remains a significant issue as many government schemes have ended and hopefully will be re-introduced this year. For instance, it will be a great impetus to the homebuyers, if the government announces extension of PMAY program. The current PMAY covers only the houses sanctioned till March 2022. With increasing urbanization, it will be only right for PMAY to increase its coverage for at least another 5 years.
UPDATE AFFORDABLE HOUSING DEFINITION
There is a consistent demand from homebuyers to update the price tag of affordable housing to avail benefits of government schemes. The inflation is on the rise, the prices of basic commodities have gone up and the cost of housing is on a constant upward trajectory year on year.
Varied associations have demanded apprising of the definition of affordable housing to align it with current market dynamics. Standardisation of affordable housing definitions across government and financial institutions will also help buyers avail maximum available benefits, includ- ing credit-linked subsidies.
The biggest challenge is the blanket price cap across the coun- try to qualify as affordable hous- ing, which is not appropriate. For example, a budget of Rs 45 lakh is irrelevant for cities like Mumbai or even Delhi and Bangalore and should be raised to at least Rs 75 Lakh and Rs 60 Lakh for other large cities. With this price adjustment, more homes will be within the reach of more buyers, who will be able to take advantage of government subsidies and reduced GST rates at 1% without input tax credit.
GIVE TAX BENEFITS
There is no doubt that stable tax regime fuels confidence among homebuyers and prompts home buying decisions. While luxury home buyers often prefer using their funds rather than seeking external borrowing, it is the mid-range (50 Lakh – 1.0 CR) housing buyers that rely significantly on home loans. Sadly, tax benefits under Section 80, which was a crucial incentive for these buyers, have not been extended and it is on every homebuyer wish list this year.
Additionally, with the recent appreciation in housing prices, people are expecting an increase in the tax rebate on home loan interest under Section 24 of the Income Tax Act. Raising the current limit from Rs 2 lakh to Rs 4 lakh could be a big incentive for the home buyers. And it is only rationale to expect this rebate, as the increase in property prices has led homebuyers to borrow higher amounts.
There is also a demand for ra- tionalization of capital gains tax. At present, tax rates on capital gains differ, depending on the type of capital asset. A reduction in the prevailing 20 percent capital gains tax will incentivise investments in housing. The buyers also demand addressing the tax burden due to the concept of notional income from housing property held as stock-in- trade after two years.
Under Section 23(5) in case of unsold property, held as stock-in- trade and not let out, the annual value of the property after a period of two years post the financial year in which completion certificate was received, will be assessable as in- come from the property on the basis of its notional rent. It is suggested that Section 23(5) be amended to either abolish 'notional income' or increase the timeline by five years for considering the notional income.
REVIVE STALLED PROJECTS
The homebuyers of the lega- cy stalled projects, some of whose homes have been delayed for almost a decade are praying for com- pletions of the projects. While RERA and IBC have provided some relief, there are about 20-25 lakh people
aggrieved with the housing projects, being stalled due to various reasons. And the only demand of these homebuyers is to revive the stressed projects, so that they can get their hard-earned homes.
Last year, a committee headed by former NITI Aayog chief Am- itabh Kant submitted its recom- mendations to address the issue of incomplete real estate projects to Union Minister for Housing and Ur- ban Affairs. The recommendations comprise a slew of relaxations for developers, including a zero-period to waive interest and penalties im- posed for financial default.
Implementing the panel's rec- ommendations would require close collaboration among ministries, state governments, and local au- thorities to ensure successful execution and help homebuyers in getting possession of their flats.
Also, in this year’s budget the home- buyers anticipate the second tranche of the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund, that will infuse the necessary funds with appropriate management to revive the
THE CURRENT YEAR HAS STARTED ON A GOOD NOTE, BUT THERE ARE MANY A EXPECTATIONS OF A HOMEBUYER ESPECIALLY IN THE LOW AND MID- INCOME SEGMENT. AFFORDABILITY, STABLE INTEREST RATES AND TIMELY COMPLETION OF PROJECTS IS THE LEAST THEY ASK.
THE INFLATION HAS EATEN INTO THE RESOURCES OF THE COMMON MAN MAKING THE DREAM OF OWNING A HOME EVEN MORE DISTANT. IN THE BUDGET HOMES CATEGORY, SALES FELL TO ABOUT 20 PERCENT IN 2023 FROM OVER 30 PERCENT IN 2022. MOREOVER, SEEING THE PERCENTAGE OF BUDGET HOUSING SUPPLY FALL TO 18 PERCENT IN 2023 FROM ABOUT 40 PERCENT IN 2019, IT GOES WITHOUT SAYING, THAT IT IS IMPERATIVE TO EXTEND INCENTIVES & BENEFITS LIKE TAX BREAKS TO ENCOURAGE DEVELOPERS TO CONSTRUCT MORE AFFORDABLE HOUSING.
THERE ARE HIGH HOPES OF IMPLEMENTATION OF THE AMITABH KANT LED PANEL'S COMPREHENSIVE RESTRUCTURING PLAN THAT WILL BRING SUCCOR TO LAKHS OF MIDDLE AND LOWER-MIDDLE- CLASS HOMEBUYERS.
NEW YEAR EXPECTATIONS
The homebuyers are hoping for an increase in the tax slab to Rs 5 lakh from the current Rs 2 lakh per annum for interest rate deduction under section 24(b) of the Act.
Additionally, homebuyers look forward to extending of tax benefits under Section 80 that will ease the home loan burden.
With property prices consistently on the rise, home buyers expect a revision in the current CLSS standard cap of Rs. 45 lakh, raising to Rs. 75-85 lakh for metro city and Rs 60–65 lakh for other large cities.
The first-time homebuyers hope the government will introduce certain tax benefit for them.
4The homebuyers also expect implementation of GST with an input tax credit on under-construction properties which will help lower property rates.
A dire need of homebuyers of stalled projects is the infusion of funds by the government to ensure the completion stressed projects.