Budget 2024 Expectations: From senior living to co-working, here are top real estate expectations for policy measures

Budget 2024 Expectations: As the interim Union budget for 2024-25 approaches, players in the sector expect key policy measures to boost growth.

While the country's real estate growth remains upbeat, reflected by historically high sales in 2023, several underlying issues, including high interest rates and lower affordability, continue to pose challenges.

As the interim Union budget for 2024-25 approaches, players in the sector expect key policy measures to boost growth. Experts say that since the pace at which issues the real estate sector faces get resolved is generally quite low, these expectations haven’t changed much, even if they’re as pressing as ever.

Here are the top expectations from Budget 2024-25.

Coworking sector anticipates policy reforms

Manas Mehrotra, the founder of flexible office space provider 315Work Avenue, said that among some policy measures sought for in the upcoming budget is having a lower goods and services tax (GST) for small-scale coworking clients. "This will significantly help the coworking industry boost their footprint by attracting small startups to be part of the industry as well as increase the revenue collection to the government," he pointed out.

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Mehrotra added that the salary cap of Rs 25,000 that applies to those seeking to avail of benefits under Section 80JJAA be raised to Rs 40,000 and the timeline for startups/coworking entities to enjoy the benefit of the section (relating to tax deductions linked to business profits and gains) be extended from three years to five as these industries generate a disproportionately large volume of employment.

Typically, stamp and registration duties are high and since both the landlord and client agreements are subject to these charges. Hence, experts say that either a concession in such stamp duty rates or allowing twice the duty paid as expenditure under income tax will encourage even small agreements to be registered.

Senior living segment hopes to gain from the upcoming budget

In India, senior care services fall under the 18 percent slab of GST.

Ironically, while services provided by residents’ welfare associations that by and large cater to earning individuals are exempt (as per the central government) up to Rs 7,500 per month per unit, no such concessions are provided to seniors who are dependent on pension or interest income.

V. Sivakumar, a director of the Indian arm of US-based senior living services providerColumbia Pacific Communities, said, "One of the solutions proposed is to grant GST exemption for maintenance/services and restaurant services, specifically catering to senior citizens. By eliminating this tax burden on essential services, senior citizens can have access to affordable senior care services and dining options."

Another probable way of resolving this issue, he added, involves allowing input credit refunds on expenses related to the maintenance of senior citizens. Input credit refunds would incentivise businesses to offer senior-friendly services and facilities, potentially reducing costs for older people.

Increasing the standard deduction limit

Introduced in Budget 2018, standard deduction means a flat deduction to individuals earning a salary or pension income. As per Budget 2023, salaried taxpayers are eligible for a standard deduction of Rs 50,000 under the new tax regime, and also the old tax regime.

Real estate prices in the country rose 5.9 percent year-on-year in the third quarter of 2023, according to the report Knight Frank Global House Price Index – Q3 2023.

Samantak Das, chief economist and head of research at property consultancy JLL India, said that if the price increase is aligned with or more than the rate of inflation, the affordability factor decreases. "The government should look to providing more income in the hands of homebuyers through fiscal exemptions like raising the standard deduction limit from Rs 50,000 currently," he suggested.

Providing MSME status to local developers

One of the regulatory interventions that boosted the real estate sector in India and brought in transparency thus boosting homebuyers' sentiments is the Real Estate (Regulation and Development) Act (RERA).

G Hari Babu, the national president of the National Real Estate Development Council, told Moneycontrol that providing MSME or micro, small and medium enterprises status to local developers will not only increase accountability and transparency but also help companies access credit at affordable rates.

Separating principal repayment component from Section 80C

The portion of the equated monthly instalment towards a home loan that is paid as principal (as opposed to the interest component) for the year is allowed as a deduction under Section 80C. The maximum amount that can be claimed is up to Rs 1.5 lakh. But to avail of this deduction, the property should not be sold within five years of possession.

Das said, "The principal repayment component should be made a separate exemption from Section 80C. When people are paying 8-9 percent home loan interest rates, doing so will be a major booster towards reducing the effective interest on home loans. "

Regulate rental housing across cities

Post-pandemic, several cities like Hyderabad and Bengaluru saw a staggering growth in rental rates, as high as 40-50 percent in some prime real estate pockets.

Vivek Rathi, national director of real estate services company Knight Frank India, said that the government should intervene to control the frenzy and offer provisions such as a fixed rental yield across cities.

"We see high rental yield in cities where the housing stock is low. Such provisions will ensure that affordable rental housing can be maintained and also help consumers in segments such as MIG or even LIG (middle and lower income group) to be able to afford residential," he added.

Extension of CLSS scheme

The Credit Linked Subsidy Scheme (CLSS) covers MIG beneficiaries seeking housing loans for acquisition/construction of houses (including repurchase) from banks, housing finance companies and other notified institutions.

For the MIG I category, which consists of individuals with an annual family income of Rs 6-12 lakh, an interest subsidy of 4 percent is provided on a loan of up to Rs 9 lakh. For the MIG II category, which is made up of individuals with an annual family income of Rs 12-18 lakh, an interest subsidy of 3 percent is given on a loan of up to Rs 12 lakh. The benefits are typically in the Rs 2-2.5 lakh range.

The CLSS vertical for economically weaker section/LIG under Pradhan Mantri Awas Yojana – Urban scheme was up to March 31, 2022.
Rathi said, "Direct fiscal support which came through schemes like CLSS will eventually drive up demand in the affordable segment whose share has reduced considerably from 48-50 percent about five years back to 30 percent today."

Maximum deduction for home loans

Anuj Puri, chairman of property consultancy ANAROCK Group, said that it is necessary that Budget 2024-25 should propose to increase the rebate on home loan interest under Section 24 of the Income-tax Act from Rs 2 lakh to at least Rs 5 lakh. Doing so could stimulate a more robust housing market, particularly in the budget homes segment, which has seen a decline in demand since the pandemic.c

Rathi added, "Because of high inflation, the affordable segment of consumers were at a greater disadvantage compared to higher segments. Such interventions are necessary to uplift the lower income segment of the homebuyers."