The upcoming Budget may turn out to be a critical one for the real estate industry. With record-low interest rates combining with incentives from states, sales of residential homes in cities are now showing strong revival despite Covid, after several years out in the cold. This has prompted the real estate lobby to put out a long wishlist of demands to keep the recovery going. But 2022 was also the year in which the NDA regime had originally hoped to realise its mission of ‘Housing for All’ under the Pradhan Mantri Awas Yojana (PMAY), its ambitious mission of ensuring pucca houses for 5 crore rural and urban poor. Covid-related disruptions led to these targets being scaled down with completion dates deferred to 2024. By this January, PMAY-Rural had delivered 1.7 crore homes against the promised 2.9 crore, while PMAY-Urban had seen just 54 lakh homes completed against the 1.14 crore target. Sops or no sops, residential home buying by affluent folk may continue post-pandemic, so the Union Budget must focus on measures that would help the PMAY regain its lost momentum.

Of the four components of PMAY (Urban) — slum redevelopment led by PPP, CLSS (Credit Linked Subsidy Scheme) for affordable homes, central assistance for EWS in affordable housing projects and the beneficiary-led scheme (BLS) where direct assistance is provided to poor families — it is the BLS and CLSS that have so far accounted for the lion’s share of homes built. Slum redevelopment and EWS projects have made little progress for lack of private sector interest. The Centre should therefore reinstate the CLSS scheme for MIG projects which was terminated last fiscal and supplement the funding for the BLS, EWS and LIG schemes, to enable funds to be disbursed until its housing targets are met. To make affordable housing projects more lucrative, the real estate lobby has suggested that the existing ₹45 lakh limit for ‘affordable’ housing in metros be stretched to ₹1 crore. When even a ₹40 lakh home is beyond “affordable” to many, it will be cruel to call a ₹1 crore home “affordable”. Increasing the limit will also lead to a crowding out of low-cost homes by premium ones which were always well-supported by both developers and home financiers.

There also appears to be little justification for the industry’s demand of further cuts in GST rates on under-construction homes as rates are already low at 1 per cent for affordable homes and 5 per cent for other homes. But given the realty industry’s multiplier effect on economic activity and employment, the Budget may consider the demand for ‘infrastructure’ status for all projects. Wholesale funding available to developers has significantly dried up after the NBFC defaults and RBI tightening the screws on home financiers last year; so, this relaxation could open up new funding avenues. The Centre can also consider giving pandemic-hit first-time home buyers some relief by raising the tax exemption on home loan interest on self-occupied homes, from the current ₹2 lakh to say, ₹3.5 lakh, which would cover interest dues on a ₹50 lakh home loan.

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