Reinvigorating India's Real Estate with a Focus on Affordable Housing
As the Union Budget 2024-25 approaches, the real estate sector eagerly awaits the government's response to its pressing needs, particularly in the affordable housing segment.
Real EstateAffordable HousingUnion Budget 2024 25Modi 30Infrastructure DevelopmentReal EstateJul 22, 2024
According to research by CREDAI-MCHI, the Indian housing market has shown remarkable resilience in 2024, with housing sales reaching unprecedented levels in the top seven cities. However, sustaining this momentum is crucial, especially as the current growth is skewed towards mid-range and premium housing. It is essential to note that the housing needs of India's lower-income groups cannot be met if the focus remains solely on higher-priced homes, while affordable housing continues to decline.
The share of affordable housing in the overall supply in the top seven cities has plummeted to 18% in Q1 2024, from nearly 40% in 2019. Many incentives for buyers and developers of affordable housing have lapsed in the last two years, exacerbating the issue. High-impact measures such as tax breaks are needed to revitalize this crucial segment.
Furthermore, it is suggested that the government reintroduces the 100% tax holiday for affordable housing developers. This benefit, previously available under Section 80-IBA of the Finance Act, 2016, provided significant tax relief on profits from affordable housing projects. Such incentives are crucial to encourage developers to focus on affordable housing.
Reviving the Credit-Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY) is essential. This scheme, which expired in 2022, provided subsidies to first-time buyers of affordable homes and should be reinstated.
There is also a pressing need to redefine the criteria for affordable housing to broaden the benefits for home buyers. According to the Ministry of Housing and Urban Poverty Alleviation, affordable housing is defined by property size, price, and buyers' income. However, these price caps are not viable in many cities, and an adjustment is necessary to allow more homes to qualify as affordable.
By taking practical viewpoints, I would rather suggest removing the price cap from the definition of affordable housing and declare all homes under 60 sq m as affordable homes to boost the affordable housing sector in India. CREDAI-MCHI's research underscores the urgent need for the government to implement these changes. By addressing these issues, the government can ensure inclusive and holistic development, help Mumbai maintain its economic leadership, and meet the housing needs of an urban population projected to reach 590 million by 2030.
The real estate sector stands at a critical juncture, and the upcoming Union Budget provides an opportunity for transformative measures. By adopting these recommendations, the government can foster a more balanced and inclusive housing market, benefiting millions of citizens.
Information CREDAI-MCHI is a real estate developers association that aims to promote the growth of the real estate sector in India. The Ministry of Housing and Urban Poverty Alleviation is a government ministry responsible for implementing policies and programs related to housing and urban development.
The Pradhan Mantri Awas Yojana (PMAY) is a government scheme aimed at providing affordable housing to all citizens by 2022. MHADA is a government agency responsible for providing affordable housing in Maharashtra.
Frequently Asked Questions
What is the current state of the affordable housing segment in India?
The affordable housing segment has seen a significant downturn since 2021, with its share in the overall supply in the top seven cities plummeting to 18% in Q1 2024, from nearly 40% in 2019.
What is the need for reviving the Credit-Linked Subsidy Scheme (CLSS)?
Reviving the CLSS is essential to provide subsidies to first-time buyers of affordable homes and stimulate demand in the affordable housing segment.
Why is there a need to redefine the criteria for affordable housing?
The current price caps for affordable housing are not viable in many cities, and an adjustment is necessary to allow more homes to qualify as affordable.
What is the recommended approach to boost the affordable housing sector in India?
Removing the price cap from the definition of affordable housing and declaring all homes under 60 sq m as affordable homes can help boost the affordable housing sector in India.
What is the significance of the Union Budget 2024-25 for the real estate sector?
The Union Budget 2024-25 provides an opportunity for transformative measures to revitalize the real estate sector, particularly in the affordable housing segment.
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