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Real estate sector hopes for continued govt support for affordable housing, increase in corpus for SWAMIH Fund in Budget
Budget 2024: The real estate sector hopes that the govt would extend tax breaks to developers for affordable housing, and improve affordability for homebuyers
With the Union Budget 2024-25 set to be tabled next month, the real estate sector hopes that interest stimulants previously extended to homebuyers and developers of affordable housing that have expired in the last two years would be renewed to give a boost to the segment.
The real estate sector is also hoping that the government will provide for further allocation to the Special Window for Affordable and Mid-income Housing Fund (SWAMIH).
“The current growth trajectory is skewed towards mid-range and premium housing. Considering the specific housing needs of India’s lower-income groups, this momentum cannot ride solely on higher-priced homes while affordable housing continues to languish,” said Anuj Puri, Chairman – ANAROCK Group.
As per ANAROCK Research, the sales share of affordable housing reduced significantly after COVID-19 - from over 26% in 2022 and over 38% in 2019 to approximately 20% in Q1 2024. Due to low demand, this segment’s share of the overall housing supply in the top 7 cities also fell to 18% in Q1 2024, from nearly 40% in 2019.
Sales of affordable homes, priced up to ₹60 lakh each, declined 4% in eight major cities to 61,121 units during January-March this year on lower supply and higher demand for luxury apartments, according to PropEquity.
Re-introduce 100% Tax Holiday for affordable housing developers
To boost supply and incentivise developers to build more affordable housing, the government can re-introduce the ‘100% Tax Holiday’ benefit they previously enjoyed under section 80-IBA in the Finance Act, 2016. This section provided for major tax relief on the profits earned from developing and building affordable housing projects, experts said.
“Initiatives such as the Credit-Linked Subsidy Scheme (CLSS) under PMAY, which promotes affordable housing, show potential for increasing demand in both urban and rural areas. Additionally, reintroducing a 100% tax exemption for developers working on affordable housing developments can alleviate major supply shortages,” said Kaushal Agarwal, chairman, The Guardians Real Estate Advisory.
“We expect the government to revive the Credit-Linked Subsidy Scheme (CLSS) under PMAY, which expired in 2022. This scheme previously benefited EWS/LIG homebuyers and supported the conversion of 'kaccha' homes into 'pucca' ones under PMAY (Rural). Reintroducing a 100% tax holiday for affordable housing developers under Section 80-IBA and updating the definition of affordable housing to reflect current market dynamics are crucial,” said Pradeep Misra, CMD, Rudrabhishek Enterprises Limited (REPL).
Tweak definition of affordable housing
According to the Ministry of Housing and Urban Affairs, affordable housing is defined based on property size, price, and buyers’ income. Affordable housing is a house or flat with carpet area up to 90 sq m in non-metropolitan cities and towns, and 60 sq m in major cities and valued up to ₹45 lakh for both. These definitions were laid down in 2017.
Developers say that the government should revisit the pricing of homes within the affordable housing budget, taking into consideration city-specific market dynamics. As per the current definition, the size of units at 60 sq. m. carpet area is appropriate. However, prices of units (up to ₹45 lakh) are not viable across most cities such as Mumbai where real estate prices are high and such price caps are not viable.
If the government were to revise the definition of affordable housing, more homes would qualify for the affordable price tag, they say.
Reviving the Credit-Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY) is essential. This scheme, which expired in 2022, provided subsidies to first-time buyers of affordable homes and should be reinstated. The CLSS was available for housing loans to Economically Weaker Sections (EWS) and Lower Income Groups (LIG) for new constructions and home improvements. Reintroducing this subsidy will stimulate demand in the affordable housing segment, they said.
Also Read: Share of luxury homes' sales now almost at par with affordable housing units
It should be noted here that officials of the ministry of housing and urban affairs had said earlier this week that the second phase of Pradhan Mantri Awas Yojana(Urban) will soon be launched and the allocation for the scheme is likely to be made in the Union budget next month.
An official in the Union Housing and Urban Affairs Ministry was quoted as saying that modalities of the PMAY-U 2.0 are currently being worked out and the second phase will be launched in less than a month. He had said over one crore houses will be constructed in the urban areas, adding that the flagship scheme is being revamped to provide assistance to more urban families.
Increase corpus for SWAMIH Fund in Budget 2024-25
Real estate experts are hoping that the finance minister will introduce the second tranche of the SWAMIH Fund with a corpus of ₹50,000 crore in the upcoming Budget.
Anshul Jain, Chief Executive, India, SE Asia & APAC Tenant Representation, Cushman & Wakefield said that the government should come up with the second tranche of the the SWAMIH Fund and an additional corpus of ₹50,000 crore can help resolve the issue of stuck projects in the mid and affordable range. “These assets can be completed and brought to the market and benefit the society at large,” he added.
Also Read: Real Estate Budget 2024: Focus on infrastructure, new housing scheme for the middle class
The real estate sector is expecting the Union Budget 2024–25 to improve liquidity, such as enhanced funding for the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund, which has been crucial in reviving stalled projects. Raising the home loan interest deduction limit from ₹2 lakh to ₹5 lakh would significantly benefit middle-income homebuyers, said Misra.
“Either allow input credit in GST for all type of construction activities or, reducing GST on under-construction properties from 5% to 1%, aligning it with ready-to-move-in properties, could stimulate demand,” he added.
