Chennai’s real estate landscape is undergoing notable changes due to recent policy shifts, impacting homebuyers, developers, and investors. The 2024 policy framework in India, marked by fiscal incentives, regulatory reforms, and infrastructure development, is strongly impacting the city, traditionally known for its stable market. As Chennai adapts to these changes, important questions about affordability, sustainability, and the future of its skyline are emerging.
A government focused on improving housing affordability and accelerating urban growth is driving this transformation. The introduction of tax breaks, subsidies, and relaxed lending norms has sparked a surge in activity within the affordable and mid-income housing sectors. However, there are ongoing concerns about the long-term sustainability of these measures and the risk of inflating property prices.
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Contents
- 1 Key Government Policies and Their Implications
- 1.1 Increased Infrastructure Investment
- 1.2 Focus on Affordable Housing
- 1.3 Sustainability and Green Initiatives
- 1.4 Tax Incentives and Financial Support
- 1.5 Market Outlook and Opportunities
- 1.6 Major Tax and Anti-Benami Property Amendments in Union Budget 2024
- 1.7 Amendment to Income Tax Act
- 1.8 Amendments to the Prohibition of Benami Property Transactions Act
- 2 Conclusion
Key Government Policies and Their Implications
Finance Minister Nirmala Sitharaman’s Union Budget 2024 introduced transformative measures for real estate, highlighting affordable housing, infrastructure, and urban planning.
Increased Infrastructure Investment
The interim budget for 2024 has earmarked a substantial ₹11.11 lakh crore for infrastructure development, marking an 11.1% increase from the previous year. This investment is expected to significantly enhance connectivity in Chennai through
- Multi-modal Transport Corridors: New railway corridors, airport expansions, and port developments will improve accessibility, making various parts of the city more attractive for both residential and commercial investments
- Enhanced Urban Livability: Upgraded infrastructure, including better roads and public transport systems, is likely to boost the overall quality of life, attracting more residents to the city and increasing property demand
Focus on Affordable Housing
The government has launched several initiatives aimed at making housing more accessible, particularly for the urban poor and middle-class families. Notable measures include
- Pradhan Mantri Awas Yojana (PMAY) Urban 2.0: This initiative aims to construct an additional one crore homes with an investment of ₹10 lakh crore. The focus on affordable housing is expected to stimulate demand, particularly in Chennai’s outskirts where land is more accessible and affordable
- Middle-Class Housing Scheme: This new scheme is designed to assist individuals living in unapproved colonies and slums, facilitating easier access to homeownership. By providing financial assistance and streamlining approval processes, the government aims to boost the affordable housing segment in Chennai
Sustainability and Green Initiatives
The 2024 policies also emphasize sustainability, aligning with global trends towards eco-friendly construction practices. The introduction of the Green Rating for Integrated Habitat Assessment (GRIHA) encourages developers to adopt sustainable building practices, which is becoming increasingly important for both buyers and investors.
Tax Incentives and Financial Support
The government has proposed increased rebates on home loan interest rates, making it more affordable for potential homeowners to enter the market. Additionally, the reduction of the holding period for long-term capital gains tax from 36 months to 12 months is expected to make real estate investment more attractive, particularly for Real Estate Investment Trusts (REITs) and individual investors.
Market Outlook and Opportunities
The confluence of these policies is expected to create a favorable environment for real estate investment in Chennai. Here are some anticipated outcomes
- Increased Property Values: Improved connectivity and infrastructure are likely to drive up property values in newly accessible areas, making them attractive for investment
- Rising Demand for Affordable Housing: With government support for affordable housing, there is expected to be a surge in demand, particularly from first-time homebuyers and lower-income families
- Sustainable Development: As sustainability becomes a focal point, properties that stick to green building standards may see increased demand, appealing to environmentally conscious buyers
- Job Creation and Economic Growth: The focus on infrastructure and housing is expected to generate employment opportunities, contributing to economic growth and, in turn, boosting the real estate market
Major Tax and Anti-Benami Property Amendments in Union Budget 2024
Amendment to Income Tax Act
Clarification on Income from House Property
- Currently, some taxpayers are incorrectly reporting rental income as business income to reduce tax liability
- A new amendment will clarify that rental income from residential property must be reported under “Income from House Property” and not under “Profits and gains of business or profession”
- This amendment will take effect from April 1, 2025
Amendments to Capital Gains Tax
- The current law provides an exemption from capital gains tax for property transferred through gifts or wills
- Taxpayers have been exploiting this loophole to avoid capital gains tax on share transfers disguised as gifts
- The amendment will restrict this exemption to gifts or wills made by individuals or Hindu Undivided Families (HUFs)
- This amendment will also take effect from April 1, 2025
Amendments to the Prohibition of Benami Property Transactions Act
Timelines for Notices and Attachments
- Introduces specific timelines for benamidars and beneficial owners to respond to notices
- Extends timelines for the Initiating Officer to attach or release properties
- These amendments aim to streamline the process and prevent delays
- This amendment will take effect from October 1, 2024
Immunity for Benamidars
- Allows the Initiating Officer to grant immunity from prosecution to benamidars who cooperate in investigations
- This is intended to encourage benamidars to provide evidence against beneficial owners
- This amendment will take effect from October 1, 2024
Overall, these amendments aim to
- Prevent tax evasion and avoidance
- Strengthen the fight against black money and benami properties
- Improve efficiency in tax administration
Conclusion
The new government policies introduced in 2024 are set to significantly impact Chennai’s real estate market, creating a landscape ripe with opportunities for investors and homebuyers alike. With a strong focus on infrastructure development, affordable housing, and sustainability, Chennai is positioned to become an even more attractive destination for real estate investment. Stakeholders in the sector should remain alert and responsive to these changes, utilizing the opportunities presented by these transformative policies to maximize their investment potential in the coming years.
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