What’s good for home buyers in this year’s budget?

This year’s budget has a lot of welcome proposals for the real estate sector, especially for a residential investment point of view.

The sector is likely to be stimulated by the proposed increase in tax deduction for home loan payments on self-occupied houses. The budget proposes an aggregate annual increase of INR100,000 in deduction from taxable income – the deduction for interest payment on housing loans has been increased to INR200,000 from INR150,000 and that under Sec. 80C (which includes principal repayment on housing loans) to INR150,000 from INR100,000.

To put things in perspective, for a person who has an INR2.0m loan carrying a 10.5% interest rate and repayable over 15 years, the reduction in monthly outflow would be about 11%. This change will immediately benefit all owners of mortgaged properties. Demand for residential real estate may also pick up as the monthly outflow required would reduce for prospective buyers. This is of course assuming that real estate prices remain stable at current levels.

The other big boost to the sector is the relaxation of minimum thresholds (built-up area and investment) for foreign direct investment in real estate projects is likely to significantly improve funds availability, especially for the affordable housing segment. The budget has proposed to reduce the minimum built-up area threshold to 20,000 sqm from 50,000 sqm and minimum investment to USD5m from USD10m for real estate projects. These minimum threshold limits however will not be applicable for those projects, which commit at least 30% of the project cost for affordable housing.

About Rs 4,000 crore has also been earmarked for low-cost housing, and Rs 50,000 crore has been set aside for urban housing. An Infrastructure Investment Trust would also be developed to provide a boost to the sector.
To lessen congestion in bigger cities, Rs 7,060 crore has been allocated for the creation of 100 smart cities.

There is something big for the developers too this time around. REITs or Infrastructure Investment Trusts would get tax benefits as well. According to Mr. Anil Mithas, CMD of the Mithas Group “It will help in easing liquidity requirement for developers paving the way to raise easy capital which will benefit all stake holders.”

All in all, there is a lot to smile about in this year’s budget for the real estate sector. It seems ‘Acche Din’ for home buyers are finally here.
Source- http://unnatifortune.com/