PUSH FOR AFFORDABLE HOMES
The Budget aims at stimulating residential demand in the affordable segment. Call for infrastructure status for the realty sector is ignored
Reactions to finance minister P Chidambaram’s Budget proposals for the realty sector were mixed, ranging from “moderately encouraging” to “no significant benefits.” While it gives a big push to affordable housing with an additional interest benefit of R1 lakh to first home loans of R25 lakh, it makes luxury homes costlier by cutting abatement on service tax on a flat exceeding R1 crore and proposes to levy a 1% TDS on immovable properties of above R50 lakh. Realty experts say that while the first provision may be a positive step and provide a fillip to affordable housing, a lot more is required to create supply in the R25 lakh category. Such supply is only found in Tier-2 and Tier-3 towns and not in the metros where the bulk of migration takes place.
According to the Budget, a first home loan of up to R25 lakh during the financial year 2013-14 will be allowed an additional tax deduction of interest of up to R1 lakh. With current interest rates hover- ing around 10% for home loans, the (at current rates) entire year’s interest will be eligible for deduction within the extended limit of R2.5 lakh. “This is likely to have a dual impact – impetus to the growth of affordable housing segment and increase in employment opportunities in the construction sector,” says Neeraj Bansal, director, advisory, KPMG.
However, this provision is only for the first year with a carry-forward benefit of the unutilised deduction to the second year. This will help boost housing sales in Tier- 2 and 3 cities and peripheral areas and distant suburbs of metros, but not within the metros, where housing is more targeted towards the mid and upper income segments, says Anuj Puri, chairman and country head, Jones Lang LaSalle India.
For availing this deduction, the assessee will have to ensure that he does not own any house on the date of sanction of the loan. The loan amount should not be more than R25 lakh and the value of the property should not be more than R40 lakh, points out Balwant Jain, CFO, Apnapaisa.