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While the affordable housing segment, the backbone of the housing sector, has witnessed a poor performance, the country's residential real estate sector looks to Budget 2023-24 to boost the country's flagging affordable housing segment.

ANAROCK's Consumer Sentiment Survey finds that in 2022, demand for affordable housing has sunk precariously. In 2018, nearly 39 per cent property seekers in the top seven Indian cities were keen on affordable homes priced within Rs 40 lakh. This demand shrunk to its lowest levels in 2022, with just 26 per cent property seekers looking to buy in this budget segment.

There is significant unsold affordable stock across the top seven cities. Of nearly 6.30 lakh unsold units in the top seven cities by 2022-end, affordable housing accounted for over 27 per cent. Demand has remained low for this segment since the pandemic, and the government needs to revitalise it on a priority basis. The upcoming budget presents an opportunity to do so.

The segment had revived after the government began to roll out incentives from 2015 and became 'respectable' with both buyers and developers. However, the pandemic seriously impacted the affordable housing segment, with both demand and supply shrinking to their lowest levels.

"One possible way the Budget can intervene is by revising the price bandwidths for homes that qualify as affordable housing, as per the specific market dynamics of different cities," said Anuj Puri, Chairman - ANAROCK Group. "The size of units that qualify for various affordable housing benefits is currently 60 sq m on carpet area. While this is appropriate, the uniform price band of up to Rs 45 lakh for affordable housing is not aligned with the market realities of most major cities."

Rs 45 lakh or below is far too low in a city like Mumbai, where it should be increased to Rs 85 lakh or more. In other major cities, the price band should be increased to Rs 60-65 lakh. This would result in more homes qualifying as affordable housing, enabling many more homebuyers to avail benefits such as reduced GST at 1 per cent without ITC, and other government subsidies.

"More tax sops for housing end-users and investors for affordable housing would also boost demand," said Puri. "The current tax rebate of Rs 2 lakh on housing loan interest under Section 24 of the Income Tax Act must be increased to at least Rs 5 lakh. This will add momentum to housing demand, particularly in the cost-sensitive affordable segment."

"Budget 2023-24 can also push the government's affordable rental housing scheme that was launched post the pandemic. Covid-19 put serious constraints on the lower income groups, causing many to step away from homebuying aspirations altogether. To add momentum to its Housing for All vision, the government can use the Budget to incentivize ARHCs (Affordable Rental Housing Complexes) which can fill the gap until homebuying capacity in the lower income groups improves, he added.