The real estate sector in India has been growing steadily, with home values witnessing a consistent rise. However, many potential homebuyers are finding it challenging to acquire a property due to several reasons. With the Finance Minister Nirmala Sitharaman set to present the Interim Budget 2024 on February 1, the homebuyer community has come up with a wishlist, hoping to see their requests addressed. They are looking for tax benefits, more flexible repayment facilities, and other measures that can make homeownership more accessible and affordable.
The Reserve Bank of India (RBI) has been maintaining a consistent repo rate in the current Financial Year (FY) 2023, which has provided immense relief to homebuyers. The RBI has projected a Gross Domestic Product (GDP) growth rate of seven percent in the current FY, and the World Economic Forum (WEF) expects India to be the fastest-growing economy in 2024-25. The real estate sector is expected to be a significant contributor to this growth. As an essential sector of the Indian economy, it is crucial that the Interim Budget 2024 considers the requirements of real estate’s key customers, i.e., homebuyers.
In the previous year, the Reserve Bank of India (RBI) maintained the repo rate at 6.5 percent which helped to stabilize the loan rates and created a favorable environment for the homebuyers. This year, homebuyers are still looking forward to stable home loan rates and affordable EMIs. The RBI’s decision played a crucial role in providing financial predictability and affordability in the housing market. As a result, the demand for homeownership has increased and people are hoping for similar favorable conditions in the new year. The stability in interest rates is a reflection of the growing aspiration among people to own a house.
Currently, affordable housing is defined as residential properties that are priced at or below Rs 45 lakh. However, due to inflation and the impact of real estate on the economy, there is a need to revise this upper limit. To encourage homebuyers and promote the growth of the real estate sector, a cap of Rs 50-60 lakh is recommended, which would provide various benefits. To make it easier for homebuyers to access affordable financing options, it is essential to standardize the definition of “Affordable Housing” across various government schemes and financial institutions.
The subvention scheme, which was previously banned, allowed homebuyers to avail loans without having to pay the interest on the availed credit immediately. This was especially beneficial for first-time homebuyers who had to bear the burden of both monthly rentals and EMIs simultaneously. With the lifting of the ban on subvention, homebuyers can now invest in properties with ease as they will only be required to pay EMIs after the possession of the property. This is expected to motivate homebuyers to invest in properties and is likely to boost the real estate sector.
The Pradhan Mantri Awas Yojana (PMAY) was launched in 2015 with the aim of providing affordable housing for all by the end of 2022. As the program nears its end, the government has increased the budget for PMAY by 66 percent to Rs 79,000 crore for the fiscal year 2024. Out of this allocation, Rs 25,103 crore has been earmarked specifically for PMAY Urban, with the goal of accelerating the Housing for All initiative.
However, the demand for affordable housing still exceeds the supply, and there is a need for incentives and subsidies to boost affordable housing projects. One possible solution is to provide tax incentives to developers who focus on affordable housing, which can encourage greater supply to address the growing demand in both urban and rural areas. Additionally, increasing the annual allocation for PMAY schemes could also be an effective way to drive demand within the affordable housing segment.
The government could also focus on increasing the fund allotment through the SWAMIH fund, which can improve liquidity in stalled residential projects.
As the Finance Minister, Nirmala Sitharaman, prepares to present the interim Union Budget 2024 on February 1, 2024, the real estate sector hopes for policies that will promote realty growth and economic development at large. The budget has the potential to shape the real estate industry into one that is both resilient and adaptable, making a substantial contribution to India’s economic growth. As the Government reveals its fiscal plans, the real estate sector is ready to embrace the opportunities presented.
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