Budget 2024: Karnataka home buyers’ wishlist for FM – focus on rental housing, take measures to strengthen RERA

According to a Knight Frank India report, the share of affordable housing (comprising homes priced below ₹50 lakh) in the overall sales pie dropped 5% annually to 27% in the January-March period of 2024 across the top-8 markets.

Also read: Real estate sector hopes for continued govt support for affordable housing, increase in corpus for SWAMIH Fund in Budget

Other demands from stakeholders in the sector spread across the country include increase in tax exemption limits tied to housing, Goods and Services Tax rationalization, digitisation of land records and an industry status for the sector, among others.

M Murali, Chairman and Managing Director of Shriram Properties anticipates announcements in support of affordable housing, simplification of regulatory approval processes and digitisation of land records, he told HT Digital.

Here’s a detailed look at the Budget 2024 wish list from real estate stakeholders in Karnataka.

Measures to strengthen implementation of RERA 2016

Homebuyers and realty developers who spoke to HT Digital expressed dissatisfaction with the functioning of Karnataka Real Estate Regulatory Authority and said that there was a need for a Central directive to ensure a more stringent implementation of the Real Estate (Regulation and Development) Act, 2016.

“If MahaRERA is the benchmark, K-RERA is only functioning at 30% efficiency,” a sectoral expert said, on condition of anonymity.

Homebuyers on the other hand expressed displeasure with the slow execution of the regulatory authority’s orders.

Also read: Real estate sector pins hopes on Modi 3.0; pushes for focus on infra development and affordable housing

The Karnataka Home Buyers Forum recently wrote to Union Minister of Housing and Urban Affairs, Manohar Lal Khattar, raising multiple concerns. In the letter dated June 13, 2024, the 400-member representative body listed challenges with regard to disposal of complaints by Karnataka Real Estate Regulatory Authority (K-RERA), minimal recovery of compensation awarded to homebuyers, non-implementation of section 17 of the RERA Act and discrepancies associated with sale deeds.

As of January 31, 2024, ₹547 crore has been sanctioned as compensation to homebuyers, a report of the regulatory body showed. Of this, 88% or ₹486 crore associated with 1,100 cases remains to be recovered from project promoters.

“Since RERA 2016 is a Central Act, the government can formulate a guideline for all state Real Estate Regulatory Authorities through their Central Advisory Committee to mandate additional measures and seek reports on a regular basis,” said Dhananjaya Padmanabhachar, a member of Karnataka Home Buyers Forum.

Improve rental housing in Bengaluru

IT capital Bengaluru has earned infamy in recent years for its rental housing market for reasons ranging from inflating property rents to enormous security deposit clauses and eccentric demands from landlords.

“The Central government should direct states to either swiftly adopt the Model Tenancy Act 2021 or amend existing state laws to provide comprehensive relief to tenants, especially students and early career professionals,” said a Bengaluru-based architect.

So far only a few states in the country, such as Andhra Pradesh, Tamil Nadu, UP and Assam have revised their tenancy acts on the lines of the Model Tenancy Act. Karnataka has the Karnataka Rent Control Act 1999 in place to address matters tied to rent and tenant eviction.

Also read: 53rd GST Council meeting: Co-living firms welcome proposal to exempt GST on accommodation services

According to a report by property consultancy Anarock, Bengaluru recorded the highest quarterly surge in housing rentals amongst the top-7 cities in India during the first quarter of 2024, at 8%.

“The HRA exemption has not kept pace with rising rentals across cities. The government can thus consider increasing the HRA exemption by 15-20% in employees’ salaries to give a boost to rental housing,” said Anshuman Magazine, Chairman and CEO for India, South-East Asia, Middle East and Africa at property consultancy CBRE.

Demand from flexible office space providers

Bengaluru is the top commercial real estate market in the country and home to a flourishing flexible workspace segment amid presence of numerous startups and global capability centres (GCCs) in the city.

Also read: Office leasing across top 6 markets up 16% annually at 15.8 mn sq ft in Q2 2024; Mumbai and Bengaluru drive demand

There has been an increasing demand to reduce the tax rates applicable for coworking spaces as a majority of the receivables from their clients are towards services. “The expectation is to bring coworking spaces into the 2% TDS slab, as in the case of services, from the present 10%,” said Magazine.

Others agreed. “Lowering this rate would make co-working spaces more accessible to startups and small businesses,” said Suvrat Jain, founder and CEO of Onward Workspaces, adding that the move will act as a catalyst for the expansion of co-working spaces across tier II and tier III cities, whilst fostering entrepreneurship and innovation in these regions.

New definition of affordable housing

Industry experts who spoke to HT Digital highlighted that the affordable housing segment can be revived with a more practical definition for the category based on realistic property values, especially in larger metro cities such as Bengaluru.

Presently, affordable housing in India is categorized based on criteria such as pricing ( ₹45 lakh), carpet area (30 – 60 square metre) and income of the homebuyer.

Also read: Share of luxury homes’ sales now almost at par with affordable housing units

“The government should consider increasing the size criteria for metro cities to 90 sq m and establishing three to four brackets of unit sizes and prices to define the eligibility criteria depending on city/state dynamics, as capital values in larger metro cities (Mumbai, Delhi-NCR) can be significantly higher vis a vis other cities,” recommended Magazine.