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Budget 2024-25: Housing sector gets a subtle boost

2 Feb 2024 , 09:46 AM


Typically, when you look for housing sops, what is it that you expect. It would mean special sops for affordable housing. The general demand each year is to extend the limit of exemption under Section 24 of the Income Tax Act to beyond Rs2 lakhs. That limit has not changed for almost a decade. The standard refrain is that the tax exemptions on  housing are out of sync with the real estate prices even in smaller towns, leave alone the metropolitan and cosmopolitan cities of India.

The other demand that is normally voiced is to remove the principal repayment from the limit of Section 80C, since that exemption was already quite crowded. Occasionally, there have also been demands for tax benefits for investing in REITs and INVITs. However, this year, the Interim Budget did not touch upon any of these topics. However, that is not to say that it did not give a push to housing. There were a number of macro and subtle announcements that have the potential to boost housing in India. Here is why, the Interim Budget 2024-25 has been important for housing.


Like in the famous Manoj Kumar flick; Roti, Kapda and Makaan have been the 3 pillars of the middle class demands. For most middle class families, an owned property continues to be out of bounds. Towards that end, the Interim Budget 2024-25 has included in its ambit, a scheme to help the middle-income group to buy homes of their own. The idea is that, people residing in rented houses, chawls, slums, or unauthorized colonies would be able to build or purchase their own homes. 

Under the massive housing project, Prime Minister Awas Yojana – Gramin (PMAY Rural), the government has already committed to build 3 crore houses and that target is nearing completion and delivery. Now, the finance minister has announced another 2 crore homes under the PMAY Rural scheme, taking the total number of such homes to 5 crore. The additional 2 crore homes will be completed over the next 5 years. However, a lot will depend on the outcome of the elections in the middle of this year. General elections are slated around May 2024. Of course, for this additional list of 2 crore homes, the government will carefully scrutinize the list and only give it for the deserving candidates.


While the expansion of the PMAY scheme will be a direct boost to housing, the housing sector is also likely to get a boost indirectly from a number of adjunct factors. Here are some key adjunct points that can have an accretive effect on housing demand.

  1. The Interim Budget 2024 has again raised its capex outlay by 11.1% to Rs11.11 trillion. Much of that typically goes into infrastructure investment and that is normally an indirect boost to housing in the adjunct areas. Inf act, the focus of the Interim Budget on improving infrastructure and connectivity will certainly support further creation of demand for both residential and commercial real estate across the country. Quite often, good road and rail connectivity improves the ability to travel to the workplace.


  2. One thing that must be remembered is that housing demand is normally lateral. When a person buys a home, the peer pressure forces others to also go the same why. That is why the allocation of 2 crore additional homes under the PMAY Rural scheme is also likely to generate a lot of additional adjunct demand for housing. Typically, infrastructure develops around housing colonies and that leads to more residential colonies in the region. For FY25, the budgetary allocation for PMAY Rural ahs been enhanced to Rs80,671 crore.


  3. The government has announced a special corpus of Rs1 trillion for funding research into sunrise sectors like alternative energy, green power, block chain, artificial intelligence, machine learning etc. This is not only expected to generate an army of qualified entrepreneurs, but also boost innovations powered by the private sector in India. One obvious corollary of this would be a spike in demand for commercial real properties. After all, businesses need offices and as like-minded colonies like Silicon Valley and Genome Valley start to develop, it is the perfect setting for the growth of housing in a big way. The demand would be a corollary, once again.


  4. The Interim Budget has raised the capex allocation by 11% to Rs11.11 trillion in FY25. Of course, this is just the start and we could see enhancements in the full budget in July. But, that is not the point. The point here is that many of the allocations in this year are likely to be accretive to the development of housing. Consider some samples. The augmentation of the multi-modal corridor connectivity and the classified new railway corridors will boost demand for commercial and warehousing real estate. Also, the doubling of airports and ports corridors are most likely to have a multiplier effect on the real estate demand in the coming year. These may play out over time. Above all, the Rs1 trillion corpus for innovation is likely to be data intensive. That means, it opens up huge real estate demand from data centres, which are inevitable for such volumes of data. In all these cases, the demand for housing is likely to be adjunct offshoot.


  5. Finally, the big focus on multi modal transport like metro rails across India, are likely to lead to a lot of housing clusters along the connected pathways. This normally creates a lot of demand for clustered housing as a direct outcome along such corridors.

With housing demand in most of the large cities saturating, the above measures are likely to create a lot of adjunct demand for housing along non-metro corridors. Once again, remember that this was only the Interim Budget. More detailed measures on tax exemptions are likely to come in the full budget in July 2024. It is time to keep our fingers crossed!

Related Tags

  • Budget 2024-25
  • capex
  • Finance Minister
  • fiscal deficit
  • Fiscal policy
  • FM
  • Union Budget
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