The Union Budget 2024, presented by Finance Minister Nirmala Sitharaman, has introduced a slew of tax incentives and deductions aimed at stimulating the real estate sector. These measures are expected to have a significant impact on home buyers and real estate developers, encouraging investment in housing and infrastructure development. This article delves into the key tax incentives and deductions announced in the Budget 2024 and their implications for the real estate market.
Enhanced Tax Deductions for Home Buyers
One of the most notable aspects of Budget 2024 is the enhancement of tax deductions available to home buyers. The government has increased the deduction limit on home loan interest under Section 24(b) of the Income Tax Act from Rs 2 lakh to Rs 3 lakh per annum. This move is expected to provide substantial relief to middle-class home buyers, making home ownership more affordable. By reducing the effective cost of borrowing, this measure aims to boost demand for residential properties, thereby invigorating the real estate market.
Additionally, the government has extended the benefit of the first-time home buyer’s additional deduction of Rs 1.5 lakh on interest paid on home loans under Section 80 EEA. This benefit, which was earlier available for loans sanctioned up to March 31, 2023, has now been extended to loans sanctioned up to March 31, 2025. This extension is particularly beneficial for first-time home buyers in the affordable housing segment, as it enhances their ability to service home loans and encourages them to invest in property.
Introduction of Affordable Housing Schemes
In a bid to promote affordable housing, Budget 2024 has allocated significant funds towards the Pradhan Mantri Awas Yojana (PMAY). The allocation for PMAY has been increased by 66 per cent, providing a substantial boost to the construction of affordable housing units across the country. This initiative is aligned with the government’s vision of ‘Housing for All’ and is expected to create ample opportunities for real estate developers to participate in the affordable housing segment.
The increased allocation under PMAY is complemented by the introduction of a new tax incentive for developers of affordable housing projects. Developers will now be eligible for a 100 per cent tax deduction on profits derived from affordable housing projects under Section 80-IBA, provided the project is completed within a specified timeline. This measure is likely to attract more developers to the affordable housing sector, thereby increasing the supply of budget-friendly homes.
Incentives for Sustainable and Green Buildings
Budget 2024 also places a strong emphasis on promoting sustainable and green buildings. The government has introduced a new tax rebate for home buyers who invest in properties that comply with green building standards. Under this scheme, buyers of certified green homes will be eligible for an additional tax deduction of Rs 1 lakh on the principal repayment of home loans. This initiative aims to encourage the adoption of eco-friendly construction practices and reduce the carbon footprint of the real estate sector.
For real estate developers, the budget offers incentives for constructing green buildings. Developers who obtain green building certification for their projects will be entitled to a 20 per cent reduction in the Goods and Services Tax (GST) applicable on the sale of such properties. This incentive is expected to promote the construction of energy-efficient buildings and contribute to the government’s sustainability goals.
Impact on Real Estate Developers
The tax incentives and deductions announced in Budget 2024 are poised to have a significant impact on real estate developers. The enhanced tax deductions for home buyers are likely to stimulate demand for residential properties, providing developers with a larger pool of potential buyers. The extension of the additional deduction for first-time home buyers will particularly benefit developers focusing on the affordable housing segment.
The increased allocation for PMAY and the introduction of a 100 per cent tax deduction on profits from affordable housing projects are expected to attract more developers to this sector. By reducing the tax burden on developers and ensuring a steady demand for affordable housing, these measures aim to address the housing shortage in the country and provide a boost to the real estate market.
The incentives for sustainable and green buildings are likely to encourage developers to adopt eco-friendly construction practices. The GST reduction for certified green buildings provides a financial incentive for developers to invest in sustainable technologies and materials, thereby promoting environmental sustainability in the real estate sector.
The tax incentives and deductions introduced in Budget 2024 reflect the government’s commitment to revitalising the real estate sector and promoting affordable housing. The enhanced deductions for home buyers, increased allocation for PMAY, and incentives for sustainable buildings are expected to stimulate demand and supply in the real estate market. For home buyers, these measures translate to reduced borrowing costs and greater affordability, while for developers, they offer financial incentives and opportunities for growth.
As the real estate sector navigates the post-pandemic recovery phase, the initiatives announced in Budget 2024 provide a much-needed impetus for growth and development. By fostering an environment conducive to investment and innovation, these measures are set to transform the real estate landscape in India, paving the way for a more vibrant and sustainable housing market.
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