Budget 2024: CREDAI Urges FM for Tax Breaks for Homebuyers and Affordable Housing Incentives for Builders

CREDAI's Budget 2024 Wishlist: Boosting Housing Demand with Strategic Measures

As the anticipation for Budget 2024 builds, the real estate sector has put forth a comprehensive Wishlist aimed at bolstering housing demand and addressing long-standing challenges. The Confederation of Real Estate Developers Associations of India (CREDAI) has outlined several key recommendations for the finance minister, focusing on tax relief for homebuyers, incentives for affordable housing, and measures to streamline the approval process.

Sustaining Housing Demand: Tax Breaks and Incentives

At the heart of CREDAI’s recommendations is a call for measures that can sustain and stimulate housing demand in the face of economic uncertainties. The real estate body suggests that the government should consider allowing unlimited interest deductions for the first self-occupied property. Currently, homebuyers can claim a tax deduction of up to ₹2 lakh on interest payments for their first home. However, CREDAI proposes increasing this limit to ₹5 lakh or removing the cap altogether. Such a move, they argue, would not only incentivize homebuying but also inject much-needed vitality into the real estate market.

For developers, CREDAI advocates for the introduction of incentives specifically targeted at constructing affordable housing projects. These incentives could include subsidies, tax breaks, and simplified regulatory processes. By making it more financially viable for builders to focus on affordable housing, CREDAI believes that the government can address the significant gap in housing availability, particularly for the economically weaker sections (EWS) and lower-income groups (LIG).

Revisiting the Affordable Housing Threshold

One of the critical issues highlighted by CREDAI is the need to revise the definition of affordable housing. The current threshold, set at ₹45 lakh since 2017, has become increasingly outdated, particularly in light of the 24% rise in housing prices across India since June 2018, as reported by the National Housing Bank. CREDAI argues that this threshold fails to reflect the current market realities, especially in metro cities where property prices have soared.

To keep pace with inflation and rising construction costs, CREDAI suggests that the government should consider revising the affordable housing threshold upwards. This adjustment would make it easier for developers to provide quality housing at a price point that remains accessible to a broader segment of the population. Moreover, revising the threshold would ensure that affordable housing initiatives remain effective in addressing the growing demand in both metro and non-metro areas.

Enhancing the Credit Link Subsidy Scheme (CLSS)

CREDAI has also emphasized the importance of optimizing the Credit Link Subsidy Scheme (CLSS), which has been a cornerstone of the government's efforts to promote affordable housing. The scheme, which provides interest subsidies to homebuyers in the EWS, LIG, and middle-income groups (MIG), has already benefited over 25.04 lakh recipients with subsidies exceeding ₹58,868 crore.

However, CREDAI believes that there is room for improvement. They recommend increasing the subsidy ceiling by 20% to make homeownership more accessible to low- and middle-income families. Additionally, they suggest that the government streamline the application process and enhance awareness campaigns to ensure that more eligible individuals can take advantage of the scheme. Collaborating with financial institutions to offer reduced interest rates could further encourage participation, making the scheme even more effective in addressing housing affordability.

Streamlining Approval Processes

Another significant concern raised by CREDAI is the need for a more efficient approval process for real estate projects. The current system is often bogged down by bureaucratic delays, which can hinder the timely completion of projects and escalate costs. CREDAI advocates for the implementation of a single-window clearance system, which would streamline the approval process and reduce the time it takes for projects to get off the ground.

Samir Jasuja, founder and CEO of Prop Equity, echoed this sentiment, stressing the importance of timely approvals in ensuring the smooth execution of real estate projects. A single-window clearance system would not only expedite project timelines but also enhance transparency and reduce the scope for corruption, ultimately benefiting all stakeholders involved.

Addressing the Challenges of Affordable Housing

The issue of affordable housing remains a central focus of CREDAI’s recommendations. The body has pointed out that the rising costs of raw materials and the inflationary impact on the economy have made it increasingly difficult for developers to invest in affordable housing projects. With the current threshold for affordable housing set at ₹45 lakh, many developers find it challenging to deliver quality homes within this price range, particularly in high-demand urban areas.

To address these challenges, CREDAI suggests that the government provide additional subsidies and tax incentives for developers who commit to building affordable housing. This could include measures such as reduced GST rates, lower land acquisition costs, and incentives for using sustainable building materials.

A Call for a Supportive Budget

As the real estate sector looks ahead to Budget 2024, there is a strong sense of optimism that the government will take decisive action to support the industry. Manoj Gaur, CMD of Gaurs Group, expressed the sector’s high hopes for the reintroduction of the interest subvention scheme, which was previously a key driver of mass housing initiatives. Gaur emphasized that such a measure would be instrumental in reviving demand and ensuring the continued growth of the housing market. Boman Irani, president of CREDAI, reiterated the association’s commitment to working closely with the government to create a conducive environment for the real estate sector. He highlighted the importance of addressing long-standing challenges, such as the need for increased interest exemptions for homebuyers and the reintroduction of the CLSS. Irani also underscored the vital role that the real estate sector plays in India’s economy, contributing significantly to GDP, employment generation, and infrastructure development. By addressing these issues, the government can set the stage for a more vibrant and resilient real estate market, benefiting both homebuyers and developers alike. As the sector awaits the budget announcement, the hope is that these recommendations will be taken into serious consideration, paving the way for sustainable growth in the years to come.