Budget 2024-2025 Will Bricks & Beyond Spark A Real Estate Investment Boom?

With fiscal year 2024-25 around the corner in India, all hopes rest on this Union Budget having real estate investment boom potential. It is a sector that has withstood all odds of the global economic headwinds and now stands at a turnkey moment when strategic policy interventions may fire up unprecedented growth.

This path of gradual upward movement has been a slow process of recovery that was influenced by the effects of the pandemic through the slowing down of the market. As per the latest data available from the National Housing Bank, its Housing Price Index has been on the ascending beam and registered an incremental 5. A 3% year-on-year increase as identified in the Q4 of 2023. Combined with growth in urban population and middle-class population, this growth creates the foundation for potentially record-breaking levels of investment in real estate in the year ahead.

According to Gunjan Goel, Director, Goel Ganga Developments, "The view looks positive. The 2024-25 Budget has all the potential to sort out major challenges that exist in the form of kinks: liquidity and administrative bottlenecks for the real estate sector. We hope it brings measures to boost liquidity, streamline the approval procedures, and incentivize sustainable development. Such steps may unlock a new era of growth for our industry."

One of the most anticipated features of the budget is likely to be the further extension of the tax benefits to homebuyers. The deduction limit of Rs 2 lakh on home loan interest, under section 24(b) of the I-T Act, has been due for an upward revision for quite some time. Industry experts have been pitching for raising this to at least Rs 5 lakh, which would slash the effective cost of owning a house and give a fillip to consumption demand.

According to LC Mittal, Director of Motia Group, "An enhanced tax deduction on home loan interest could be a game changer. Not only will homeownership be made more affordable, but an encouragement of long-term investment in real estate may set off a chain reaction and boost allied industries and overall economic growth."

Affordable housing, which is one of the prime focus areas for the government's 'Housing for All' policy objective, is another sector that could see considerable policy attention. According to experts, an extension of the CLSS under Pradhan Mantri Awas Yojana comes at the top of the industry's wish list. An increase in carpet area limits for affordable housing and a revision in the price caps can bring in more projects under the category, benefiting both developers and homebuyers.

States Aman Gupta, Director, RPS Group, "The affordable housing segment has immense potential to become the growth driver of real estate. We expect policy initiatives to make it more viable for private developers to take up such projects. This could involve faster approvals, tax sops, and easier access to funding. Such steps will not only boost the sector but significantly contribute towards overcoming India's housing shortage."

Policy interventions may also be seen in the commercial real estate sector, which has shown remarkable resilience. The government could consider introducing REITs for residential properties along the lines of what already exists for commercial properties to attract retail investors into this space.

Infrastructure development is another area that could indirectly have a positive impact on real estate investments. In fact, increased allocation for urban infrastructure projects, smart cities, and transportation networks would further increase the attraction of different locations to real estate development.

Gaurav Kansal, Director of KBP Group, stated, "Infrastructure development is the backbone of real estate growth. We're looking forward that the budget allocations would support the creation of new urban centers and improvement in connectivity. This not only opens up new areas for development but also enhances the value of existing properties."

The rental housing market has been neglected in earlier budgets, and this may be a priority issue for this budget as well. Incentives like the Model Tenancy Act being implemented across states, coupled with sops on tax exempted for rental incomes, could induce investments in that particular segment of the market and cater to the increasing demand for rental accommodation in urban areas.

The other important theme that may emerge out of the budget is sustainability. Incentives on green buildings, tax breaks for sustainable materials, and assistance in meeting real estate projects with renewable energy could help align the sector with global environmental goals and open up new investment avenues.

However, some challenges remain. The real estate sector continues to battle through issues of high input costs, complex regulatory environments, and liquidity constraints. A budget that comprehensively addresses these concerns will truly unlock the potential of the sector.

A single window clearance system for real estate projects, if introduced, might prove a giant step toward breaking regulatory logjams. This could be followed up with efforts to boost the 'ease of doing business' in the sector and could, therefore, attract more foreign direct investment and domestic capital.

With Budget 2024-25 around the corner, the real estate sector is perhaps standing on the verge of defining change. Indeed, a robust policy intervention mixed with tax incentives and regulatory reforms appropriately could unleash a wave of real estate investment and provide increased support for economic growth that meets the changing housing needs of the country's population. The interesting months come next as stakeholders in the industry, investors, and homebuyers at large await the Budget announcements with bated breath. The high level of optimism is one side of the story, but the real test will lie in the deliverance of these measures on whether they can create an ecosystem of real estate which is sustainable, inclusive, and strong.

Conclusion

It's in Budget 2024-25 that hope to see as a turning point for the real estate sector in India. Unless it is capable of proactively addressing some of the major challenges and, at the same time, incentivizing investment aligned with global sustainability and technology trends, the stage would be set for a new phase of growth in the Indian real estate market. Now, the question that comes to everybody's mind is, will this budget do what people hope it will and really light up a boom of real estate investments? Time will only say; but surely, the seeds of such transformation are being sown.

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