In anticipation of the Union Budget 2024, the real estate sector has high expectations and several key areas where it seeks support and reform. Niranjan Hiranandani, a prominent figure in the real estate industry, highlights several aspects that are likely to influence the sector significantly over the next year and beyond. This report will cover growth predictions, the impact of policy measures like the Pradhan Mantri Awas Yojana (PMAY), and the budget wish list for the real estate sector.
Growth Projections
Niranjan Hiranandani predicts substantial growth for the real estate sector, estimating a 10 to 15% compounded growth rate over the next year. This optimistic outlook is supported by several factors:
- Extension of the PMAY Scheme: The continuation of the PMAY scheme, which includes an interest subvention of approximately ₹60,000 crores for affordable housing over the next five years, is expected to drive growth in the affordable housing segment.
- Increase in Home Loan Offerings: Home loan providers are anticipating a 20% increase in home loan offerings, suggesting robust demand and support for housing finance.
- Contribution to GDP: Currently, housing constitutes about 7% of India's GDP. As India aims to become a $5 trillion economy, housing and infrastructure are projected to account for 20% of GDP, translating to a significant $1 trillion contribution.
Key Areas of Focus
Affordable and Mid-Segment Housing
The affordable and mid-segment housing markets are expected to see the most significant growth. The government's emphasis on affordable housing, bolstered by the PMAY scheme, will likely encourage more investment and development in this area.
Rental Housing
Hiranandani emphasizes the need for a focus on rental housing, which remains underdeveloped in India. He notes that in countries like the United States, 50% of the population lives in rental housing. To address this gap, policies supporting the development of rental housing could be crucial.
Budget Wishlist for the Real Estate Sector
Hiranandani outlines several recommendations and requests for the Union Budget 2024 that could further bolster the real estate sector:
- Interest Deduction for Income Tax: The current interest deduction limit for income tax has been stagnant at ₹2 lakhs. Increasing this limit to ₹5 lakhs would account for inflation over the years and provide more substantial tax relief for homebuyers.
- Capital Gains Tax Reform: There is a disparity between the treatment of capital gains from real estate and the stock market. Real estate capital gains are taxed at 20% after a holding period of three years, while stock market gains are taxed at 10% after just one year. Aligning the tax treatment of real estate with that of the stock market could incentivize more investment in real estate.
The Union Budget 2024 holds significant potential for the real estate sector. With expected growth driven by policy measures like the PMAY scheme, increased home loan offerings, and potential GDP contributions, the sector is poised for substantial development. Addressing the budget wishlist items, particularly in areas like rental housing, interest deductions, and capital gains tax reform, could further enhance the sector's growth trajectory and overall contribution to the economy.
