Budget 2024: Government plans incentives for affordable housing ahead of Lok Sabha elections

India plans to announce an extension to Prime Minister Narendra Modi's flagship federal housing scheme in next month's budget and an increase in available subsidies for low-cost housing loans, three sources said, ahead of elections this year.

Finance Minister Nirmala Sitharaman, who will present an interim budget on February 1, is likely to raise allocations for low-cost housing by more than 15% to ₹1 trillion ($12 billion) for 2024/25 from ₹79,000 crore in the 2023/24 budget, two of the government sources said.

Also Read | Realty wants sops, affordable housing push

India, with a population of more than 1.4 billion, faces a shortage of more than 20 million houses in rural areas according to the government's internal estimates. The urban housing shortage, estimated at more than 1.5 million, was expected to double by 2030, according to industry forecasts.

Modi, who faces voters in national polls before end-May, launched the scheme in 2015 with the goal of "Housing for All."

India's federal and state governments have spent $29 billion over the last five years under the programme to provide support for rural and urban low-cost housing, the government told parliament last month.

Also Read | Real estate outlook 2024: Is affordable housing finance ready for takeoff?

It was to end in December 2024 but the government could extend it for another three-to-five years as it has still to meet its target, said a third government source, declining to be identified because budget proposals are not public.

The Finance Ministry declined a request for comment.

Modi said on Monday his government had constructed concrete houses for around 40 million impoverished households since he became prime minister in 2014.

Also Read | India would require 6.4 crore additional homes by 2036 because of population growth: Report

Opposition parties have said the scheme missed its original deadline of 2022 to meet its targets, and millions of people were still to get benefits.

Rising housing demand, costs

Officials want the finance minister to extend the programme and increase incentives due to a rise the cost of land and building materials.

Under the housing scheme, the federal government provides an interest-cost subsidy of between ₹100,000 to ₹267,000 to households that obtain bank loans for housing construction, in addition to subsidies from state governments.

Also Read | Budget 2024: How the Union Budget is prepared? A quick guide

Officials favoured an increase in financial assistance to about ₹200,000 for each house in rural areas, and an interest subsidy on home loans of up to ₹5 million in urban areas.

A proposal would soon be sent to the cabinet on interest subsidies for urban affordable housing, Hardeep Singh Puri, India's Housing and Urban Affairs said on Friday.

He declined to comment when asked about proposals for the housing sector in the budget.