Budget 2019

Exemptions provide key to affordable home

Our Bureau Mumbai | Updated on January 27, 2018 Published on February 29, 2016


Budget offers many sweeteners for developers and first-time buyers

Homes are set to become more affordable with the government announcing sops, including exempting the construction of houses less than 60 sq metres from service tax. In addition to this, the Budget has also sweetened the deal for first-time buyers and developers operating in the category.

For first-time home buyers, an additional deduction of interest of ₹50,000 is proposed, provided the value of the house does not exceed ₹50 lakh. This will increase the disposable income in the hands of the tax payer.

‘Boost to sector’

Venkatesh Gopalkrishnan, President-CIO, Shapoorji Pallonji Real Estate, said, “The exemptions provided on housing loan interest for first-time home buyers and affordable housing will provide a boost to the stressed residential sectors and is likely to spur supply of affordable homes”.

Also, the government has proposed to provide 100 per cent deduction on profits to an undertaking from a housing project for flats up to 30 sq m in four metro cities. Ajay Jain, Head, Real Estate Group, Centrum Capital Ltd, said, “A 100 per cent deduction on profit is proposed to undertakings for construction of affordable housing: This will be a big boost to the developers as it encourages other developers who are currently not looking at this space.” Industry watchers say the exemption for affordable housing projects would bring an additional 15-20 per cent of profits after paying MAT.

Getamber Anand, President – CREDAI National, said, “There is a timeline fixed for delivery of such affordable houses. All we ask for now is speeding up of the approval process as the whole project needs to be delivered in a time frame of about three years.”

Additionally, ₹2,18,000 crore has been allotted for the construction of new roads and railways, and this will have a direct impact on the housing sector.

An increase in tax deduction from ₹24,000 to ₹60,000 for those living in rented houses will also benefit the rented flat-holder, thereby complementing indirectly the housing sector.

According to Rahul Sabharwal, CEO, VBHC Value Homes, the Budget has not done enough to uplift the housing sector and more steps are needed.

Deductions not enough

Kishor Pate, CMD, Amit Enterprises Housing Ltd, also said that the deductions announced are not sufficient to increase the sentiment for first-time home buyers in the central parts of metros like Mumbai, where housing prices are exceedingly high and such an exemption makes little or no difference to the burden on home buyers.

Gagan Banga, VC-MD, Indiabulls Housing Finance, said “Demand will be spurred by increase in deduction against interest repayments up to ₹2.5 lakh which will reduce effective interest rate to 4 per cent levels for a 9.5 per cent housing loan. The Budget has also done away with distribution tax on securitisation transactions, which will result in opening up large pools of capital from insurance and pension funds to flow to housing finance companies.”

Published on February 29, 2016
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