India Budget: What real estate sector wants from Nirmala Sitharaman – Moneycontrol

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Currently, under Section 115QA of the Income Tax Act, the company is liable to pay tax at a flat rate of 23.3 percent on distributed income in a buyback

Owning a home is still a dream for millions of Indians, and the government may try to take it closer to reality for them when the finance minister presents the interim budget on February 1.

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Analysts said the Indian real estate market is expected to continue its bullish trend in 2024 due to a healthy macroeconomic outlook and an upbeat job market. Infrastructure development, lower borrowing costs, and tax reforms are expected to spur growth and investment, fostering a sustainable real estate environment.

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Among steps already taken to address this issue is the Pradhan Mantri Awas Yojana, a government initiative to provide access to affordable housing that is set to end in 2024.

Real estate allocation

The Pradhan Mantri Awas Yojana (PMAY) has two parts – rural and urban – each catering to poorer households. The scheme provides interest subsidy to homebuyers.

During FY24, of the targeted 850,000 houses, 821,000 were sanctioned, as per data available on January 31, of which 222,000 were completed.

Under PMAY-Rural for all years so far, 2.94 crore homes have been sanctioned and 2.55 crore built. Similarly, for PMAY-Urban, over 8 million houses have been built out of 11.8 million sanctioned.

Apart from this, measures such as the introduction of the real estate regulatory authority, tax benefits and stable interest rates have led to a boom in the real estate market in recent years. Jefferies said in a recent report that volumes in India’s housing market surged 25 percent YoY in 2023, doubling in three years.

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Demands and expectations

The sector wants further policy moves to boost real estate in the country. The demands include:

Boost affordable housing: The PMAY scheme, which provides central subsidy, is valid till December 2024 and should be extended till December 2025 as it is currently the most potent tool that the government has to support homebuyers in the economically weaker sections, said Shishir Baijal, chairman of Knight Frank India.

Incentivise rental housing: The government can incentivise rental housing for the low-income segment, for many of whom acquiring a home is simply not an option. The budget could introduce 100 percent exemption for rental income up to Rs 3 lakh for houses costing up to Rs 50 lakh. This would incentivise investors to rent out properties and augment the supply of rental accommodation, the segment most impacted by the housing shortage.

Make home purchases more tax efficient: Under Section 54 of the Income Tax Act, long-term capital gains tax benefits can be claimed if the proceeds from the sale of existing houses are utilised to buy or construct new property. If the proceeds are invested in an under-construction property, the benefit can be claimed only if the construction is completed within three years of the sale. Bajaj said the timeline of under-construction properties should be extended to five years.

Commercial property

The commercial real estate segment is also hopeful.

“As we approach a new fiscal year, budget 2024 will hold a lot of potential for significant economic growth, job creation, and infrastructure development. The commercial real estate sector eagerly awaits strategic measures to propel India toward its $5-trillion economy goal,” said Shiv Parekh, founder of hBits, a company that allows investors to own fractional shares in property.

Dushyant Singh, director of Orion One 32, a workspace destination for professionals in Noida, said tax concessionary schemes should be introduced to encourage developers to undertake commercial real estate initiatives and announce projects in newly developing avenues and corridors.

Analysts and investors will monitor the shares of real estate companies DLF, Sobha and Macrotech Developers, if any of the demands are met in the interim budget.

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