Real estate developers urge the finance minister to boost affordable housing in the Budget through measures like reinstating the credit-linked subsidy scheme (CLSS), revising the definition of affordable housing in major cities, and introducing input tax credit for GST paid. They seek to increase the home loan interest tax deduction from INR 2 lakh to INR 5 lakh and simplify the approval process. The affordable housing segment has declined, with sales dropping from 38% in 2019 to 20% in 2023 due to high interest rates. Developers suggest raising the affordable housing price cap to INR 1 crore in metro cities.
Real estate developers are calling on the finance minister to implement several measures in the upcoming Budget to bolster the affordable housing segment. Their proposals include reinstating the credit-linked subsidy scheme (CLSS), revising the definition of affordable housing in larger cities, and introducing input tax credits for GST paid. Additionally, they are advocating for an increase in the income tax deduction for home loan interest from the current INR 2 lakh to INR 5 lakh and a streamlined approval process across the country.
While the premium and luxury housing segments have prospered in the recent residential boom, the affordable housing sector has struggled due to high interest rates and decreased affordability. According to Anarock Property Consultants, the share of affordable housing in residential sales has dropped from 38% in 2019 to 20% in 2023. Sanjay Dutt, managing director and CEO at Tata Realty & Infrastructure, emphasised the necessity of reinstating incentives like the CLSS under the Pradhan Mantri Awas Yojana (PMAY) and providing 100% tax holiday benefits for developers to revive this segment.
Revising the definition of affordable housing to reflect city-specific dynamics is also crucial. In cities like Mumbai, where affordability thresholds are insufficient, adjusting pricing benchmarks would ensure broader access to benefits such as lower GST rates and government subsidies. Dutt suggested that in Mumbai, properties valued between INR 50 lakh and INR 75 lakh should be considered for affordable housing.
Niranjan Hiranandani, managing director at Hiranandani Group, proposed an even higher value cap of INR 1 crore for metro cities that have experienced muted demand-supply scenarios. He also advocated for the removal of hindrances related to the 80-90% floor area ratio (FAR) and the payment of tax on profits via alternate minimum tax (AMT) or minimum alternate tax (MAT).
Currently, affordable housing is defined as a flat or house with a carpet area up to 90 square metres in metros and towns, and 60 square metres in major metros, or valued up to INR 45 lakh, or both. Pradeep Aggarwal, founder and chairman of Signature Global (India), supported expanding the definition of affordable housing to include homes worth up to INR 75 lakh with a larger carpet area. He believes that relaunching the CLSS or a similar scheme would significantly benefit homebuyers.
Developers stress that these measures are essential to revitalise the affordable housing segment, ensuring it can meet the needs of a broader population and contribute to the overall growth of the real estate market.
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