Budget 2024: Why Property Moguls Want Tax Breaks for Middle-Class Indians

That the Indian real estate sector is booming is true. The financial year that ended March 31, 2024 saw 4.93 lakh residential units sold, the highest-ever, according to an estimate by the Mumbai-based Anarock Property Consultants. Yet this truth hides a reality that reveals the contrasting nature of economic growth that India has seen the last few years, where the super rich are buying uber luxury homes while the middle- and low-income groups give up their homebuying dreams. 

And now, an unlikely bunch of people are standing up for the Indian middle-class: realtors. 

Realtors, by and large, are calling for the Indian government to reduce the tax burden on the middle- and low income groups to stir up home-buying. Robust property sales in India cannot sustain if affordable housing does not get a fillip, says Anuj Puri, chairman of Anarock. Puri is calling for measures in the Union Budget that would increase the purchasing power of homebuyers in the middle- and lower-income brackets.

Make Housing Affordable Again

While property sales in India have been on the rise, the share of affordable housing units in the properties sold has seen a steady decline. The demand for affordable housing took a hit in 2019 when the share of such houses sold dropped to 38 per cent of the total number.

Since then, the share has only dropped, going down to 20 per cent at the end of the last fiscal. 

Affordable housing is defined in India as a residential apartment or house with a carpet area of up to 90 square metre  (or 968.7 square feet) in major cities or towns. In the metros, homes of 60 square metre (645 square feet) or those valued up to Rs 45 lakh qualify as affordable housing. 

Ahead of the Union Budget 2024, set to be read in Parliament on July 23, Puri of Anarock says, “Expectations are high for tax relief and other sentiment boosters. The future of the overall [real estate] industry depends on unfettered infrastructure development to support and improve urban living standards as well as develop and promote new areas.”  

Home of One’s Own 

India’s middle- and lower-income groups have been struggling to buy homes over the last few fiscals. In a bid to curtail inflation, the Reserve Bank of India (RBI) has increased the benchmark interest rate or repo rate cumulatively by 250 basis points to 6.5 per cent between May 2022 and February 2023. The rate hikes have translated to higher interest rates on housing loans. 

Murali Malayappan, chairman and managing director of Shriram Properties, says, “Stabilising interest rates for home loans is essential to make housing more accessible.” While stabilising interest rates is in the purview of the RBI, realtors expect a return of the credit-linked subsidy scheme (CLSS) in the Union Budget. 

Bring Back the Subsidies 

A component of the Pradhan Mantri Awas Yojana (Urban), the CLSS initiative was introduced in January 2017. Its goal was to provide affordable housing to the urban poor. 

The initiative offered interest subsidies on housing loans to economically-weaker sections (EWS), low-income groups (LIGs) and middle-income groups (MIGs). Subsidies ranged from 3 per cent to 6.5 per cent on housing loans. 

These subsidies were discontinued in 2021 for MIG and 2022 for EWS and LIG as the Union government prioritised fiscal consolidation and checked expenditure wherever it could. But now, with a bumper surplus of Rs 1 lakh crore from the RBI and various industry bodies calling to give consumption a bump-up, realtors hope the Centre will have a change of heart.

Ashok Singh Jaunapuria, managing director and chief executive of real estate developers SS Group, says, “The property sector looks forward to the Budget with anticipation of tax reforms, more incentives for affordable housing, higher investment in urban infrastructure and streamlined regulatory processes.”

Along with a return of CLSS, builders are now calling for an increase in the interest deduction limit on home loans from Rs 2 lakh to Rs 5 lakh. “Increased deductions on home loan interest can make owning a home more financially viable for many, potentially leading to a surge in demand for residential projects,” says Jaunapuria.

Several industry groups are calling on the government to provide some relief to taxpayers in a bid to give consumption a fillip. Earlier, the fast-moving consumer goods (FMCG) sector also called on the government to provide relief to citizens to stir demand, especially in the rural markets.