Union Budget 2024: What does the real estate sector expect?

• Union Budget 2024: Economic Survey 2023-24 says India's real GDP growth at 6.5-7% in FY25

Budget 2024 Expectations For The Real Estate Sector

The Indian real estate sector has been experiencing a significant boom in recent quarters, driven by factors such as rapid urbanisation, policy reforms, an increase in disposable income, and a continuous growth in consumer sentiments. Last year, the sector registered remarkable progress, consolidating its position among various other sectors.

With budget 2024 approaching, a strong sense of optimism prevails throughout the sector. There are numerous prerequisites that we are looking forward to being fulfilled, including a potential decrease in the GST rate, lower interest rates on home loans, a decline in property prices overall, the implementation of a more efficient single-window clearance system, and the development of off-centre locations.

One major expectation from this year’s budget is the grant of industry status to the sector. The real estate industry has played a significant role in boosting the country's economic growth. Granting industry status to this sector will not only attract more investments but also streamline various governing procedures.

The Indian real estate sector anticipates significant reforms in the upcoming budget, including GST reduction, lower interest rates, industry status, and incentives for affordable and sustainable housing, aiming to boost growth and accessibility nationwide.

Budget 2024 Expectations Live Updates: Finance Minister Nirmala Sitharaman to present her 7th straight Budget tomorrow; Key numbers are to be watched.

Union Budget 2024 Live: Finance Minister Nirmala Sitharaman will on Tuesday present her 7th straight Budget that would lay a roadmap for Viksit Bharat (developed India) by 2047, while giving a glimpse of 10 years' performance.

Reduction in GST and interest rates

There is a strong possibility that there will be a reduction in GST rates. The introduction of the GST input tax credit rule is expected to reduce prices of property, thereby enhancing transparency in the overall process. This step is critical for organisations leading the real estate sector’s transition into a new era, fostering sectoral growth not only for homebuyers but also for the economy.

The industry is also expecting a possible reduction in GST rates and measures to stabilise the costs of materials. These actions could have a significant positive effect on developers and homebuyers. If these strategic measures are implemented, we can envision a thriving real estate market that fulfils the dreams of developers and homebuyers, while also contributing to economic growth nationwide.

Encouraging the growth of affordable housing

The current government’s focus has been ‘Housing For All’ for a while and in this budget, it is expected this goal will gain further impetus. Expanding affordable housing to embrace residential properties ranging between ₹65 lakhs to ₹75 lakhs with significantly larger carpet areas clubbed with the re-launching of credit-linked-subsidy-schemes (CLSS) will be beneficial to homebuyers. Apart from that sustained investments in housing and urban development and infrastructure are crucial for ongoing growth, enhanced standard of living and more job creation.

Live updates here---

https://economictimes.indiatimes.com/news/newsblogs/budget-2024-economic-survey-live-updates-expectations-income-tax-cut-home-loan-fm-nirmala-sitharaman-income-tax-slab-22-july-latest-news/liveblog/111912920.cms?from=mdr

Union budget may approve ₹4.5 trillion for rural housing scheme

Increased focus on sustainability

There is a growing anticipation regarding the introduction of certain incentives curated to upkeep sustainable and eco-friendly homes or residential projects, particularly within the affordable housing segment. These incentives may include favourable loan-terms, subsidies and tax benefits for developers and buyers who prioritise green building practices.

The rationale behind this expectation is twofold: firstly, it addresses the pressing need for environmental sustainability by reducing carbon footprint and resource consumption associated with inclusive real estate development. Secondly, it provides housing options that are not only affordable but also comply with energy-efficient regulations, resulting insubstantial long-term savings and an enhanced quality of life. Promoting green housing projects will not only align with bigger environmental goals but will also support the urgent need for affordable housing solutions.

Priority to infrastructure development

As the budget draws closer, we expect the government to implement measures to stimulate growth and sustainability across the sector. Our expectation is that the government will prioritise infrastructure development, streamline regulatory processes and offer incentives for green building practices. By introducing certain reforms to uplift transparency along with ease of business, we can encourage investment and ensure long-term economic stability. The sector is hopeful that the budget will lay the foundation for a stronger and more resilient real estate landscape.

Ultimately, if these policies get implemented, the real estate sector will continue on its path of steady growth.

Budget announcements

Increase deduction limit on interest payment

National Real Estate Development Council (Naredco), a builders’ body, has suggested that the tax exemption on interest on self-occupied property loans should be increased to ₹5 lakh in the upcoming budget from ₹2 lakh currently to boost housing demand amid a rise in housing prices and mortgage rates.

Developers have also sought some tax incentives to boost demand and supply of affordable homes. NAREDCO noted that under Section 24 of the Income Tax Act, the deduction allowed on interest on loans for self-occupied property is limited to ₹2 lakh.

Real estate players have lauded the Union Budget for its strong emphasis on urbanisation, infrastructure development.

Sushil Mohta, president of CREDAI West Bengal and chairman of Merlin Group, praised the government's ambitious goal to increase the real estate sector's GDP contribution from 8 per cent to 13 per cent by 2025. 'The proposed focus on urbanisation is expected to drive growth in this sector,' Mohta said.

He highlighted initiatives such as the Rs 2.2 lakh-crore allocation for urban housing affordability and Rs 10 lakh-crore investment to address housing needs for urban poor and middle-class families, including dormitory-style rental housing for industrial workers under the PPP mode. 'Rental housing with dormitory-type accommodation for industrial workers in PPP mode is the need of the hour and will provide better living conditions for industrial workers,' he added.

Shishir Baijal, chairman and managing director of Knight Frank India, echoed these sentiments, welcoming the budget's focus on long-term social and infrastructure development. He particularly appreciated the Rs 10 lakh-crore allocation under the PMAY scheme and initiatives to promote rental housing, alongside regulatory reforms like digitisation of land records and GIS mapping.

'The Union Budget for FY 2024-25 has further strengthened the government's commitment towards long-term social and infrastructure development,' Baijal said.

Sahil Saharia, CEO of Bengal Shristi Infrastructure Development Ltd., commended the government's introduction of a new interest subsidy scheme and additional funding for affordable housing, highlighting the PPP model for rental housing aimed at enhancing accessibility and affordability for industrial workers.

Amit Goyal, managing director of India Sotheby's International Realty, welcomed the reduction in long-term capital gains tax, foreseeing it would stimulate liquidity in property transactions and meet investor demands for uniformity in tax rates across asset classes.

Samantak Das, Chief Economist and Head of Research & REIS, India, JLL, expressed support for the Budget's measures to boost housing for all. He emphasised the importance of the Rs 1.48 lakh-crore outlay dedicated to employment generation, which should boost incomes for homebuyers in the affordable housing segment. Das also praised initiatives to boost tourism corridors in states like Bihar and Odisha and the Rs 15,000 crore allocation for the development of the capital of Andhra Pradesh, which will drive real estate development.

Real estate stocks decline as Budget 2024 removes indexation benefit on long term capital gains tax

Real estate stocks fell after Finance Minister Nirmala Sitharaman proposed to eliminate the indexation benefit on calculating long term capital gains tax (LTCG) on real estate. The Nifty Realty index was down 2.6 percent in the afternoon trading on July 23. DLF stock fell more than 6 percent to day’s low of Rs 778.2 over the Budget 2024 announcement.

The Finance Minister, in a bid to rationalise the capital gains tax regime, changed the Long Term Capital Gain tax rate to 12.5 percent across all financial and non-financial assets. This would result in the LTCG tax on property falling from 20 percent earlier.

Benchmark indices fell, with the Nifty 50 down 0.6 percent, or 136 points, and Sensex down 350 points.

Other realty stocks tanked too. Macrotech Developers was down 3.6 percent, Godrej Properties down 5 percent, Prestige Estates down 5.3 percent, Phoenix Mills down 2.1 percent.

The indexation benefit adds the inflation rate to the asset’s purchase price. At the time of the sale of the asset, this means a higher purchase price, resulting in a lower capital gain -- or even zero in some cases, eventually resulting in a tax benefit. Without indexation, the gain would be calculated on the actual purchase price, potentially resulting in a higher tax outgo.

“This proposal may not sooth taxpayers goosebumps as the proposal, in the garb of simplification, largely skews towards heightening tax rates in certain instances,” said Sandeep Jhunjhunwala, M&A Tax Partner, Nangia Andersen LLP, regarding the overall LTCG proposals made in the Budget 2024.

Credit: Moneycontrol

Originally posted by: nutmeg7

Real estate stocks decline as Budget 2024 removes indexation benefit on long term capital gains tax

Real estate stocks fell after Finance Minister Nirmala Sitharaman proposed to eliminate the indexation benefit on calculating long term capital gains tax (LTCG) on real estate. The Nifty Realty index was down 2.6 percent in the afternoon trading on July 23. DLF stock fell more than 6 percent to day’s low of Rs 778.2 over the Budget 2024 announcement.

The Finance Minister, in a bid to rationalise the capital gains tax regime, changed the Long Term Capital Gain tax rate to 12.5 percent across all financial and non-financial assets. This would result in the LTCG tax on property falling from 20 percent earlier.

Benchmark indices fell, with the Nifty 50 down 0.6 percent, or 136 points, and Sensex down 350 points.

Other realty stocks tanked too. Macrotech Developers was down 3.6 percent, Godrej Properties down 5 percent, Prestige Estates down 5.3 percent, Phoenix Mills down 2.1 percent.

The indexation benefit adds the inflation rate to the asset’s purchase price. At the time of the sale of the asset, this means a higher purchase price, resulting in a lower capital gain -- or even zero in some cases, eventually resulting in a tax benefit. Without indexation, the gain would be calculated on the actual purchase price, potentially resulting in a higher tax outgo.

“This proposal may not sooth taxpayers goosebumps as the proposal, in the garb of simplification, largely skews towards heightening tax rates in certain instances,” said Sandeep Jhunjhunwala, M&A Tax Partner, Nangia Andersen LLP, regarding the overall LTCG proposals made in the Budget 2024.

Credit: Moneycontrol

For real estate transaction, bringing down the long-term capital gains tax from 20% to 12.5% is a welcome step, even if it comes with removal of indexation benefits.

This will encourage more liquidity in property transactions.Higher uniformity in long term capital gains tax across different asset classes was a long standing ask of investors.