The Union Budget plays a crucial role in determining the real estate industry’s growth path. Budget 2024 is expected to meet high expectations as the industry works through a number of obstacles and recovers from the pandemic.
The Real Estate Landscape
A number of reasons, including growing urbanization, increased disposable incomes, and government initiatives, have contributed to the recent revival of the real estate market in India. The sector’s full potential is still being hampered, nevertheless, by issues including expensive real estate, intricate regulatory structures, and poor infrastructure.
Current Scenario: Taxes and GST in Real Estate
Tax reforms like GST and RERA have significantly changed the real estate industry. These changes have raised business expenses even as they have improved accountability and transparency.
Impact of GST: Adding GST to buildings that are still under construction has increased the cost of housing overall. Despite lower GST rates for affordable housing, the industry as a whole still bears a significant burden.
Data Point: A recent study by ANAROCK found that the average GST rate on residential properties that are still under construction is 5%, which raises the overall cost of real estate by 5-8%.
Income Tax Consequences: The purchasing power of homebuyers and the profitability of developers have been influenced by high income tax rates for both people and businesses.
Stamp Duty and Registration Charges: These state-level taxes vary widely, affecting the overall cost of property ownership.
Middle Class Aspiration: Affordable Housing and Tax Relief
The middle class, which makes up a sizable share of homebuyers, is an important market group for the real estate industry. In order to boost demand and encourage homeownership, the middle class anticipates relief in the next budget.
Push for Affordable Housing: It is imperative that government assistance programs aimed at achieving affordable housing continue. This includes increased funding for infrastructure development in affordable housing projects, tax breaks for developers, and subsidies for homeowners.
Income Tax Relief: By lowering income tax slabs or raising the tax exemption threshold, more individuals will be able to afford homes and have more disposable money.
Data Point: The demand for affordable housing has increased by 20% over the past two years, according to NHB RESO data, demonstrating the potential of this market.
Budget 2023’s effects:
A number of initiatives to support the real estate industry were included in the Union Budget 2023, including:
1. Extending the tax incentives for affordable housing was one way to increase demand for this type of housing.
2. Put your attention on developing infrastructure: Real estate developers should benefit from infrastructure investments.
3. Urban development: The real estate industry is expected to gain from the government’s emphasis on urban regeneration initiatives.
The sector applauded these steps, but more assistance should still be provided.
Expectations from Budget 2024 for Real Estate :
The real estate sector is looking for a budget that addresses the following key areas:
Infrastructure Development: Increasing funding for transportation and urban development projects, in particular, can raise demand for real estate.
Simplifying the Tax System: Lowering income tax rates, rationalizing the Goods and Services Tax (GST) rate, and expediting the stamp duty procedure can all help to bring down the total cost of real estate.
Financing Availability: For the market to thrive, buyers and developers need to have easier access to financing.
Affordability: To alleviate the housing scarcity, efforts to build affordable housing must be continuously prioritized.
Encouraging Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) can help the real estate market become more liquid.
Data Point: As of March 2024, the total amount invested in the real estate sector through REITs and InvITs had reached Rs. 1.5 lakh crore, demonstrating the instruments’ expanding potential.
The budget may significantly contribute to revitalizing the real estate industry and enabling more Indians to become homeowners by addressing these issues.
Data Insights : To support these expectations, let’s analyze some key data points:
India’s rate of urbanization: The World Bank projects that in the upcoming years, India’s rate of urbanization will rise dramatically, increasing demand for residential and commercial real estate.
Growth in home loans: Disbursements from home loans have been rising gradually, a sign of rising demand for homeownership. Moneycontrol reports that the increase of home loans has picked up speed in the last several quarters.
Investment in real estate: Strong private equity investments have demonstrated investor confidence in the Indian real estate market. A Hindustan Times story claims that private equity investments in the industry have hit a record level.
Demand for affordable housing: As the supply of affordable housing continues to fall short of demand, government assistance is clearly required. The Ministry of Housing and Urban Affairs’ most recent report highlights the disparity between demand and supply.
Conclusion :
The real estate industry is at a crossroads, full of opportunities as well as major obstacles. Although the existing tax system aims to be transparent, it has unintentionally raised expenses that impact both developers and buyers of real estate. One important market sector that longs for relief to fulfill the dream of homeownership is the middle class. A healthy real estate ecosystem that benefits all parties involved requires a well-rounded strategy and data-driven insights.