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Budget 2024: What’s New for Real Estate?

The Union Budget 2024 has introduced several reforms and incentives expected to impact India’s real estate market significantly.

The budget prioritizes affordability, addresses tax implications, and emphasizes infrastructure development. These changes bring opportunities and challenges for investors, developers, and homebuyers.

Here’s a detailed look at what’s in store for real estate in Budget 2024.

Real Estate Budget 2024

Removal of Indexation Benefit and Increased Tax Rates

The Budget 2024 brings a significant change by eliminating the indexation benefit for long-term capital gains (LTCG) from property sales. Previously, indexation allowed property sellers to adjust the purchase cost for inflation, thereby reducing taxable gains. Under the new regime, this benefit has been removed, resulting in an increase in the effective LTCG tax rate from 10% to 12.5%.

Furthermore, the budget proposes an increase in the short-term capital gains (STCG) tax rate from 15% to 20%. This adjustment is likely to impact individuals involved in quick property transactions, potentially affecting market liquidity and promoting a more stable investment environment.

Affordable Housing

Enhanced Support for Affordable Housing

Affordable housing takes centre stage in Budget 2024 with several key initiatives:

Increased Deduction Limits: The limit for home loan interest payments is set to increase from ₹2 lakh to ₹5 lakh per annum. This adjustment aims to enhance accessibility to homeownership, particularly for lower and middle-income buyers, while also boosting demand in the housing market.

GST Adjustments: A concessional GST rate without input tax credit (ITC) for affordable housing projects is expected to lower construction costs, making such developments more financially sustainable.

Revival of Credit-Linked Subsidy Scheme (CLSS): The revival of CLSS will provide financial support to first-time homebuyers in economically weaker sections and low-income groups, making home purchases more attainable for a broader demographic.

100% Tax Holiday for Developers: Developers of affordable housing projects will receive a 100% tax holiday, which is anticipated to encourage more investment and help address the shortage of affordable homes.

₹10 Lakh Crore Allocation: An impressive ₹10 lakh crore has been allocated for the development of an additional 3 crore houses under the Pradhan Mantri Awas Yojana (PMAY). This allocation is expected to spur construction activity and have a positive impact on related sectors.

PM Awas Yojana-Urban 2.0: This scheme is designed to meet the housing needs of 1 crore urban poor and middle-class families, providing substantial support to the affordable housing sector.

Increased Construction Activity

The budget has earmarked ₹2.2 lakh crore over five years to expedite housing projects.

This augmented allocation is expected to stimulate greater construction activity, providing developers and construction companies with increased investment and project prospects.

Support for Individual Workers

The budget contains provisions for the development of rental housing, especially for industrial workers, by offering dormitory-style accommodations.

This move is anticipated to boost demand for rental housing and spur the launch of more affordable housing units.

It signifies the initial steps toward establishing a structured rental housing market in India.

Urban Development and Strategic Land Utilization

Optimizing Land Use and Accelerating Project Completion: The government intends to utilize unused or underutilized land held by public sector enterprises for affordable housing projects, aiming to enhance land use efficiency and expedite project completion.

Enhancing Transparency through Digitization: Technological reforms, including GIS mapping and digitization of land records and cadastral maps, are set to improve transparency and efficiency in land management.

Introducing Unique Identification for Land: A unique identification number for land, known as ‘Bhu-Aadhaar,’ will be introduced in rural areas, alongside urban land record digitization, to streamline land administration and planning.

Rationalizing Stamp Duty Rates: The budget proposes to rationalize stamp duty rates across states, with a specific focus on reducing duties for women homebuyers, aiming to lower property acquisition costs and bolster buyer sentiment.

Fiscal Support for Land-Related Reforms: States will receive fiscal support to implement land-related reforms, with a focus on land administration, urban planning, and building bylaws.

Urban Development Focus: Urban development takes precedence in the budget, encompassing initiatives such as ‘Cities as Growth Hubs,’ Transit Oriented Development (TOD) in large cities, and a framework for creative brownfield redevelopment.

Rural Connectivity and Development

The anticipated improvements in rural connectivity and infrastructure are poised to bolster rural development and stimulate housing demand in rural areas.

The increased accessibility and investment potential are expected to drive housing demand in these regions.

Enhancements to the Insolvency and Bankruptcy Code (IBC)

The budget incorporates revisions to the Insolvency and Bankruptcy Code (IBC) aimed at reinforcing the financial stability of the real estate sector.

These changes include the implementation of an integrated technology platform to improve outcomes and the establishment of additional debt recovery tribunals to enhance resolution processes.

Focus on Economic and Industrial Development

The budget addresses the economic development of Micro, Small, and Medium Enterprises (MSMEs) with a ₹15,000 crore financial assistance package for the development of Andhra Pradesh’s Amaravati.

This regional focus underscores the government’s dedication to broader economic and industrial growth.

real-estate-market-segments

Impact on the Real Estate Market

The proposed changes in Budget 2024 are anticipated to have a varied impact on the real estate sector:

Increased Tax Burden: The elimination of indexation benefits and the rise in STCG tax rates could lead to heightened costs for property sellers, potentially dampening speculative investments and influencing market liquidity.

Boost to Affordable Housing: The enhanced deductions, GST adjustments, and revived subsidies are predicted to bolster demand for affordable housing, potentially addressing the ongoing shortage and fostering further development in this segment.

Stimulus for Homebuyers: The reduction in stamp duty rates and augmented tax deductions for home loans are expected to favour first-time buyers and those seeking to upgrade their homes.

This could instigate heightened market activity and bolster home ownership.

Long-Term Market Dynamics: While immediate effects may be significant, the long-term impact will hinge on how effectively these measures address the supply and demand dynamics in the housing market.

The emphasis on affordable housing and strategic land utilization could pave the way for more sustainable market growth.

Budget 2024 brings reforms and incentives to revitalize India’s real estate sector, focusing on affordable housing, strategic land use, and tax reforms.

As the market adapts to these changes, stakeholders must do the needed research to capitalize on new opportunities and address potential challenges.

The emphasis on affordability, strategic investments, and improved infrastructure sets the stage for sustainable growth in India’s real estate market.

At Save Max, we prioritize accuracy and reliability in every piece of information we share, making us a trusted source for all your real estate needs. As a leading brokerage company in India, we offer a diverse portfolio of projects and properties across major cities, including Delhi, Gurgaon, Noida, Bangalore, Pune, Kolkata, and Chandigarh.

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