As Budget 2024 approaches, the real estate sector is expecting significant changes in the price bands that define affordable housing. The existing criteria will be changed to better align with the different economic landscapes of cities. In particular, industry experts urged the government to re-evaluate the pricing structure.
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Although experts feel that the current unit size definition of a 60-square-meter carpet area is appropriate for affordable housing, the universal price of Rs. Concerns have been raised over the 45 lakhs limit, which is not feasible in most cities. In metros like Mumbai, stakeholders have argued for a raise of ₹85 lakh or more, while other major cities suggest a raise of ₹60-65 lakh.
Proponents argue that such adjustments would benefit a wide range of home buyers from existing incentives like the Input Tax Credit (ITC) and 1% reduced GST without other government subsidies to make more homes more affordable.
Extension of PMAY Scheme till December 2025
Pradhan Mantri Awas Yojana (PMAY), the cornerstone of affordable housing, will end in December 2024. The real estate sector has sought an extension of the PMAY scheme till December 2025 to continue providing central subsidies.
Eligibility criteria for home buyers under PMAY, specifically interest subsidies of ₹2.3 to ₹2.7 lakh, is considered limited. Industry experts argue that PMAY standards should be improved to increase affordability in the face of rising housing prices.
According to the Chairman of Knight Frank India,
“The share of sales in the sub-Rs. 50 lakh housing units (affordable house sales) segment has gradually declined from 48% in 2018 to 30% in 2023. Total house sales are also going from strength to strength and will reach 10.16% year over year in 2023. This is due to inflation and rising house prices. Homebuyers in this segment are heavily impacted by interest rates and affordability constraints,” said Shishir Baijal, Chairman and Managing Director of Knight Frank India.
There has been a steady decline in the demand for and sale of affordable housing following the COVID-19 pandemic. ANAROCK Research data points to a post-pandemic slowdown in demand for affordable housing. leading developers to scale back new supply in the category.
Indian Real Estate Hits $10 Trillion Milestone
The share of total new supply in the affordable category in the top 7 cities has fallen from 26% in 2021 to just 18% in 2023. In terms of sales, the budget housing segment has declined to around 20% in 2023. 30% in 2022 and around 40% in the pre-pandemic period.
“Through our recommendations, demand has increased through a mix of increased tax exemptions and tweaks in the definition of affordable housing. We believe that both will give us a huge boost. Some key fundamental issues have been addressed. Certainly, Indian real estate will come into account. After reaching the $10 trillion milestone, it will be the largest contributor to India’s economy. will hold a 20% stake,” said Credai President Boman Irani.
Price Cap Revision under PMAY-Affordable Housing
Industry stakeholders urged the government to raise the ₹45 lakh price cap, the long-standing limit for affordable housing defined under schemes like PMAY and tax exemptions. Experts highlighted its impracticality in metro markets where home prices have soared. Proposals included:
- ₹60–65 lakh cap in major cities
- ₹75–85 lakh cap in metros like Mumbai and Delhi.
Expanding price limits would allow more homes to qualify for benefits such as 1% GST without ITC, CLSS subsidies, and Section 80IBA tax incentives.
Current Challenges in the Affordable Housing Definition
As of now, a home is considered “affordable” if:
- The price is up to ₹45 lakh
- The carpet area is up to 60 sqm in metros and 90 sqm in non-metros
However, these thresholds are increasingly outdated, especially in Tier-1 cities, where even modest apartments exceed ₹60–70 lakh due to rising land and construction costs.
Proposed Amendments Under Budget 2024
- Revision of Price Limit
Real estate bodies have urged the government to raise the price cap to:- ₹60–65 lakh in non-metro urban areas
- ₹75–85 lakh in major metro cities like Mumbai and Delhi
- Carpet Area Focus Over Price Cap
Industry experts recommended that affordable housing eligibility should be based only on carpet area, not price, to account for cost variations across cities. - Tax Incentive Expansion
- Increase home loan interest deduction (Section 24) from ₹2 lakh to ₹3–5 lakh
- Introduce a separate deduction for principal repayment beyond the current ₹1.5 lakh under Section 80C
- Reintroduction of CLSS and Developer Incentives
- Revival of the Credit Linked Subsidy Scheme (CLSS) under PMAY
- Bring back 100% tax holiday for developers under Section 80‑IBA to encourage more affordable housing projects
Conclusion
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Also read: Budget 2024 Provides for Housing in India | Openplot