The Confederation of Real Estate Developers’ Associations of India (CREDAI) has initiated a pivotal discourse on redefining affordable housing parameters to align with the current economic landscape. This initiative aims to address the challenges posed by inflation and escalating construction costs, thereby fostering a more inclusive and sustainable housing market.

The Rationale Behind Revising the Affordable Housing Cap

Inflation and Escalating Construction Costs

Since the establishment of the ₹45 lakh cap in 2017, the real estate landscape has undergone significant transformations. Inflationary pressures, coupled with rising costs of raw materials, labor, and regulatory compliances, have escalated property prices across the country. According to the National Housing Bank, housing prices have surged by approximately 24% since June 2018, rendering the existing cap increasingly obsolete.

Disparities in Urban Housing Markets

Metropolitan cities like Mumbai, Delhi, and Bengaluru have witnessed substantial hikes in property valuations. In these urban centers, the cost of a modest 600 square feet apartment often exceeds ₹1 crore, far surpassing the current affordable housing threshold. This discrepancy underscores the need for a revised cap that reflects the realities of urban housing markets.

Proposed Reforms by CREDAI

Elevating the Price Cap to ₹80 Lakh

Established in 2017, the existing affordable housing price cap of ₹45 lakh has become increasingly misaligned with market realities. CREDAI proposes elevating this cap to ₹75–80 lakh, reflecting the substantial appreciation in property values across urban and semi-urban regions. This adjustment is crucial for ensuring that a broader demographic can access housing benefits, including reduced GST rates and eligibility for government-backed schemes.

Tax Incentives and GST Reforms

In a bid to invigorate the housing sector, CREDAI recommends significant tax reforms:​

• Interest Deduction Enhancement: Transitioning from the current ₹2 lakh cap to a 100% deduction on home loan interest payments under Section 24(b) of the Income Tax Act.​
• Principal Repayment Incentives: Increasing the deduction limit under Section 80C for principal repayments from ₹1.5 lakh to ₹3 lakh, or establishing a separate exemption category for housing loan principal repayments. ​
• GST Reduction: Implementing a 1% GST rate on under-construction homes priced up to ₹80 lakh, as opposed to the current 5% rate for properties exceeding ₹45 lakh.

These measures are designed to alleviate the financial burden on homebuyers, thereby stimulating demand and contributing to economic growth.

Redefining Affordable Housing Parameters

CREDAI suggests redefining affordable housing based on carpet area rather than price, proposing limits of 60 square meters in metropolitan areas and 90 square meters in non-metropolitan areas. This approach aims to standardize the definition across regions, ensuring equitable access to housing benefits irrespective of market price fluctuations.

• Metropolitan Areas: 60 square meters
• Non-Metropolitan Areas: 90 square meters

This approach aims to standardize the definition across regions, accommodating varying market conditions.

Also Read: The Rise of Affordable Housing: Opportunities and Challenges in India

Anticipated Impact on the Real Estate Sector

Enhanced Housing Accessibility

Revising the affordable housing cap is expected to make homeownership more attainable for middle-income groups, particularly in urban locales where property prices have surged.

Economic Stimulus

The proposed reforms are poised to invigorate the real estate sector, generating employment opportunities and contributing to the nation’s GDP. By facilitating increased housing development, the sector can play a pivotal role in achieving the government’s vision of a $5 trillion economy.

Streamlined Regulatory Processes

The real estate sector often encounters protracted approval processes, with developers spending 12–18 months obtaining necessary permits. CREDAI underscores the need for regulatory reforms to expedite project approvals, thereby reducing costs and accelerating project timelines.

Investing in Data Analytics for Informed Decision-Making

Recognizing the importance of data-driven strategies, CREDAI plans to establish a comprehensive data analytics hub. This platform will aggregate information from various sources, including state-level Real Estate Regulatory Authorities (RERAs) and revenue departments, to provide accurate insights into sales and registration trends.

Promoting Sustainable Development and Skill Enhancement

CREDAI is committed to sustainable development, advocating for the construction of green buildings and the creation of urban forests. Additionally, the organization aims to upgrade 1,000 government schools and skill approximately 500,000 construction workers, thereby contributing to social development and employment generation.

Conclusion

CREDAI’s comprehensive proposals underscore the necessity for policy reforms that reflect current economic conditions. By recalibrating affordable housing definitions, implementing tax incentives, streamlining regulatory processes, and investing in data analytics and sustainability, these initiatives aim to revitalize the real estate sector and promote inclusive growth.