Budget FY25: Govt to facilitate rental housing for industrial workers, encourage states to moderate stamp duty rates

“We will encourage states which continue to charge high stamp duty to moderate the rates for all, and also consider further lowering duties for properties purchased by women,” Sitharaman said during her Budget 2024-25 speech, adding that this reform will be made an essential component of urban development schemes.

In India, property registration is a state subject, empowering the state governments to levy and collect stamp duties and registration fees tied to real estate transactions.

“The emphasis on encouraging state governments to reduce stamp duty and other development premiums is a decisive step. This will not only bolster urban housing growth but also make affordable housing more accessible, optimize development costs, and invigorate the demand curve,” said Niranjan Hiranandani, Chairman, Hiranandani Group and NAREDCO.

Additionally, Sitharaman announced the Modi 3.0 government’s plan to facilitate rental housing comprising dormitory-type accommodation for industrial workers. It will be developed in the public-private partnership mode with viability gap funding and commitment from anchor industries, she added.

“Maybe they are testing it and seeing how the performance of rental housing in industrial (setting) for the blue collared workers as a dormitory on a PPP mode works. If this works well, then who knows, this may expand on public-private partnership to bring affordable housing on rental basis to larger cities, urban areas,” Anuj Puri, Chairman, ANAROCK Group told HT.com. He added that this move may be the start of a much bigger opportunity where developers may benefit over a period of time if the experience goes well.

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Others agreed. “The initiatives taken to boost rental housing, such as the planned setting up of a regulatory framework and the specific creation of dormitory-style rental housing for industrial workers, mark the beginnings of a much-needed rental housing market in the country,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

Rental housing market in India

Responding to increasing calls from home tenants across the country, Sitharaman also announced the newly re-elected Modi government’s intentions to undertake measures to improve availability and transparency in the rental housing segment.

“Enabling policies and regulations for efficient and transparent rental housing markets with enhanced availability will also be put in place,” Sitharaman said, presenting her seventh consecutive Union Budget.

This move is expected to benefit a significant chunk of the population, including middle and lower-middle class Indians, early career professionals and students across the country.

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According to a report by property consultancy Anarock, the top 7 cities saw an average jump of 4-9% in rents in the January-March period of 2024. Considering that the typical annual increase is 5-10%, this is significant and signifies a worrisome element of cost-of-living inflation for tenants, the analysis showed. Besides high rents, enormous security deposit clauses comprise another significant area of concern in this segment.

The Model Tenancy Act of 2021 lays down a set of measures to regulate the rental housing market whilst balancing the interests of tenants and landlords. It can be voluntarily adopted by individual states as rent remains a state subject.

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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. Some states have their own legislations in place to address matters tied to rent and tenant eviction, such as the Karnataka Rent Control Act 1999.