Budget 2024: Realty firms eye tax relief, redefining of affordable housing

Realty stocks are in the spotlight, driven by robust demand. With the Budget approaching, investors are closely watching key players like DLF, Godrej Properties, and Prestige Estates for potential gains.

Realty has been among the best-performing sectors in 2024 so far, with strong demand boosting cash flows and strengthening balance sheets of property developers. This has led to investors making a beeline for the shares of realty firms and bidding up key stocks to record highs or multi-year highs.

The Nifty Realty index has jumped 48 percent this year, and industry players feel that with the right incentives in the Budget, the party may just be getting started.

Realtors are looking forward to tax reliefs and other measures that will stimulate demand, enhance affordability, and address various structural issues.

Industry wish list

Industry Status: A key expectation is granting industry status to the real estate sector. This move would facilitate easier access to funds and attract foreign investments, thus boosting liquidity and project execution capabilities.

Affordable Housing and Revival of Stalled Projects: Besides these two measures, additional funding under the SWAMIH scheme and launch of new subsidy schemes like the Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY) are expected.

Revising the definition and upper limit of affordable housing to reflect the current market conditions would further enhance affordability.

Tax Benefits: Revisions in tax slab rates, increasing the standard deduction, and raising the deduction limits for interest on home loans are crucial demands. Reducing the long-term capital gains tax rate would also make real estate investments more attractive.

Digitisation: Digitization of land records is another key reform expected, aiming to increase transparency, reduce disputes, and streamline transactions.

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Required reforms

Increased allocation for PMAY to boost demand in Tier 2 and Tier 3 cities is vital. An “Interest Subvention Scheme” for middle-class housing could promote homeownership among this demographic.

Additionally, revising the income tax rate and increasing the limit of eligible deductions for home loan interest to at least Rs 3 lakh, and removing the Rs 2 lakh cap on interest set-off against salary for rented or deemed-to-be-let-out properties, would significantly benefit homeowners.

Stocks to Watch

Axis Securities expects a continued focus on affordable housing schemes and enhancements in digital infrastructure, which would benefit major real estate players.

They highlight companies like Prestige Estates, Macrotech Developers, and Godrej Properties as positive picks. Additionally, data centre-focused players like Anant Raj and urban developers like MICL and TARC are expected to gain.

Meanwhile, Fisdom anticipates funding for affordable housing and the development of satellite townships near metro cities, aimed at improving urban infrastructure.

Stocks including DLF Ltd., Godrej Properties, and Oberoi Realty will be in the spotlight. Analysts at Sharekhan are positive on DLF and Sunteck Realty, expecting them to benefit from the Budget's focus on real estate growth.

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