Affordable Housing Market Set for Growth Amid Income Tax Relief
The recent Union Budget’s announcement of a complete income tax exemption for individuals earning up to ₹12 lakh annually is expected to have a significant impact on the real estate sector, particularly in Tier 2 cities. While demand for housing in these cities has been steadily rising, a supply crunch due to fewer new project launches has created an imbalance in the market.
In contrast, Tier 1 cities have managed to maintain a balance between sales and supply, ensuring stability. However, in Tier 2 cities, the increase in disposable income resulting from tax exemptions is expected to further fuel demand, leading to a surge in affordable housing sales. With higher savings on EMIs, prospective buyers will find it easier to invest in property, further accelerating market activity.
Experts suggest that while the tax exemption is a welcome move, additional policy support is needed to boost housing supply. Pankaj Kapoor, Managing Director of real estate research firm Liases Foras, noted that reinstating the 100% tax deduction on profits from affordable housing projects under Section 80-IBA could have incentivized developers to increase supply. “Perhaps the reinitiation of the 100% tax deduction on profits from affordable housing projects under Section 80-IBA would have been ideal to promote the supply of affordable housing projects,” he said.
With increasing demand and a potential rise in supply, Tier 2 cities could soon become the new growth hubs for real estate. Industry stakeholders now await further policy measures that could complement the tax exemption and ensure a well-balanced housing market.
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