Budget Agenda

Dr Samantak Das, Chief Economist and Head – Research & REIS, India, JLL

As India gears up for the Union Budget 2024, the Indian real estate sector, which has witnessed robust growth and demand recovery post-pandemic, is expected to receive some stimulus to propel its growth further. The sector is expecting the following announcements that could benefit homebuyers and the industry.

1. Fiscal Incentives for ESG Initiatives: The rise of the Environmental, Social, and Governance (ESG) agenda in real estate necessitates direct financial incentives. We expect tax benefits provision for corporate green bonds and exemptions to encourage the development of net-zero buildings.
2. Incentives for Data Centre Parks: As India is the most eligible country to become the global data centre hub due to lower capex costs, an adequate talent pool, and improving digital infrastructure, specific fiscal and non-fiscal incentives are crucial to attract investments in data centre parks.
3. Separate Section for Principal Repayment on Home Loans: The impact of rising home costs can be partly offset by increasing the principal repayment limit up to INR 2 lakh on home loans, independent of the current Section 80C deductions, thereby increasing the affordability levels for homebuyers.
4. Increase in Interest Deduction Limit Under Section 24(B): An increase in the home loan interest deduction limit from INR 2 lakh to INR 4 lakh for tax rebates could significantly improve homebuyer savings and decision-making.
5. Enhancement and Extension of Section 80EEA Benefits: The extension and enhancement of the interest deduction for first-time homebuyers under Section 80EEA, with an increased limit of INR 2.5 lakh, could boost the housing market’s momentum, especially in the lower and mid-income segments.
6. Parity in REITs Long-Term Capital Gains Treatment: Aligning the holding period for long-term capital gains tax on REIT units with that of equity shares (one year) will remove constraints for retail investors and boost REIT attractiveness.
7. 100% FDI in Completed Residential Projects: The capital investments required for the growth of the residential real estate sector can be facilitated by permitting 100% Foreign Direct Investment (FDI) in completed residential projects through the automatic route, thereby unlocking funds for higher growth.
8. Extension of Section 80IBA for Affordable Housing Projects: Extending the 100% tax holiday under Section 80IBA for affordable housing project approvals until March 2025 would support continued growth in this critical sector.
9. Increased Allocation for the SWAMIH Fund: Additional funding for the Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund, which has completed several stalled projects, will help more brownfield affordable housing projects reach completion.
10. Industry Status for the Real Estate Sector: Granting full ‘Industry’ status to the real estate sector is imperative, given its multi-sector impact and potential for significant employment generation. This status would fuel investments and holistic sector development.

As we await the Union Budget 2024, it is hoped that the government will consider these measures to propel the real estate sector, ensuring sustained growth, affordability, and broad-based development.