Budget 2024: An Opportunity To Address The Decline of Affordable & Mid-Segment Housing In Real Estate Sector

Real estate consultants report a significant drop in new launches for apartments below Rs 50 lakh, with builders shifting focus towards premium flats. This trend, fueled by rising construction costs and a perceived shift in buyer preference towards luxury living, threatens to leave a large segment of the population without access to adequate housing.
There are several factors contributing to this decline. The increasing cost of land and materials, coupled with inflation, has squeezed profit margins for developers in the affordable segment.

Consequently, they are incentivized to build high-end properties that offer a better return on investment. Furthermore, the current definition of "affordable housing" under the Pradhan Mantri Awas Yojana (PMAY) scheme, with a price cap of Rs 45 lakh for metropolitan areas and a maximum carpet area of 60 square meters, poses challenges. Many dwellings that meet these criteria are no longer genuinely affordable for middle-income earners.

To revive the affordable housing segment, the government needs to implement high-impact measures. First, a revision of the definition of affordable homes is essential. Taking into account rising construction costs and inflation, the price threshold for affordable housing should be increased. This will allow more homes to qualify for subsidies and tax benefits, making them more attractive to both buyers and developers in metropolitan areas.

Secondly, reintroducing a 100% tax holiday for affordable housing developers would be a significant incentive. Previously available under Section 80-IBA of the Finance Act, 2016, this tax relief on profits from affordable housing projects significantly boosted supply. Bringing back this scheme would encourage developers to return to this crucial market segment.

Streamlining the approval process is another key step. A single-window clearance system would eliminate bureaucratic hurdles and delays in obtaining permits, ultimately reducing development costs for affordable and mid-affordable housing projects.

Furthermore, reviving the Credit Linked Subsidy Scheme (CLSS) under PMAY would be a game-changer for low-income groups and economically weaker sections (EWS). This scheme, which expired in 2022, provided interest rate subsidies on home loans, making them more accessible to these demographics. Relaunching the CLSS would not only increase homeownership rates but also stimulate demand in the affordable housing market.

Finally, granting infrastructure status to the real estate sector would offer developers significant advantages. This would allow them to access cheaper loans and benefit from other financial incentives. Additionally, infrastructure status could streamline regulatory procedures and improve the overall viability of affordable housing projects.

In conclusion, the upcoming budget presents a critical window for the government to address the crisis in affordable housing. By implementing a combination of these measures - revising PMAY definitions, reintroducing tax breaks, streamlining approvals, reviving CLSS, and granting infrastructure status - the government can incentivize developers, improve affordability for buyers, and ensure that all segments of society have access to decent housing. The future of affordable housing in India hinges on the decisions made in Budget 2024.