According to a Knight Frank report, sales in the affordable housing segment fell to just 30% in 2024, highlighting the urgent need for a policy shift. Real estate leaders are now advocating for the house value limit under PMAY to be increased from ₹35 lakh to ₹50 lakh to accommodate rising costs.
G Hari Babu, National President of NAREDCO, emphasized the issue stating, “The luxury segment is thriving, but affordable housing demand has plummeted. To revive it, we suggest offering a fixed interest rate of 5% under PMAY to encourage buyers to take larger loans and invest in affordable homes.”Shishir Baijal, MD of Knight Frank India, echoed this sentiment stating, “The current limit of ₹35 lakh for affordable housing in metro cities is outdated. We propose increasing it to ₹50 lakh so more urban buyers can benefit. Additionally, the interest rate subsidy under PMAY must account for this new reality.”
The industry is also pushing for enhanced tax rebates on home loans to make housing more accessible. Under Section 24(b) of the Income Tax Act, home loan interest rebates are currently capped at ₹2 lakh. Developers argue that this limit is insufficient given the sharp rise in home prices, calling for it to be increased to at least ₹5 lakh.Shishir Baijal pointed out the potential benefits of this move stating, “A higher tax rebate of ₹5 lakh on home loan interest will significantly boost affordability and encourage more people to buy homes.”
While affordable homeownership has been the focus, real estate players are also advocating for incentives to boost the rental housing market. Millions of homes under ₹50 lakh remain unoccupied due to low rental yields, creating an untapped opportunity.
To address this, industry leaders propose a 100% tax exemption on rental income up to ₹3 lakh per year for homes valued at ₹50 lakh or less. This measure aims to encourage homeowners to rent out their properties, benefiting both landlords and tenants.
Shishir Baijal stated, “A 100% tax exemption on rental income up to ₹3 lakh per annum would encourage homeowners to rent out their properties. This benefits both investors and those unable to afford their own homes.”
As Budget Day approaches, the real estate sector is hopeful that these much-needed reforms will be addressed. The wishlist is clear: revise outdated affordability limits, enhance tax rebates on home loans, and introduce rental housing incentives. If the government delivers on these expectations, it could usher in a new era of inclusive and accessible housing for urban India.
For now, it’s a waiting game—all eyes are on February 1st to see how the government responds to the sector’s pressing demands.
