Union Budget 2017-18: Arun Jaitley's announcements could lead to more spacious homes
SPS Pannu February 2, 2017
Finance Minister Arun Jaitley's Union Budget unveiled on Wednesday was like a housewarming party for young professionals as he brought their dream homes within reach and also increased their net pay by halving the tax rate for those with annual incomes up to Rs 5 lakh.
The government announced infrastructure status for affordable housing to encourage investment in this segment and offered tax sops to developers sitting on completed but unsold homes to revive the sector. At present, the houses which are unoccupied after getting completion certificates are subjected to tax on notional rental income.
"For builders for whom constructed buildings are stock-intrade, I propose to apply this rule only after one year of the end of the year in which completion certificate is received so that they get some breathing time for liquidating their inventory," Jaitley said. The measurement norm has been changed to carpet area from built-up area, which will make more spacious homes eligible for the "affordable housing" concessions, Jaitley pointed out.
The National Housing Bank will refinance individual home loans of about Rs 20,000 crore in 2017-18, he said in his speech. The government also proposed to relax the condition of period of completion of project for claiming deduction from the current three years to five years, giving builders and buyers more breathing space to organise their finances.
"We must appreciate the fact that the government is very serious on the mission of housing for all and in the same light we have seen some extremely positive announcements in the budget today. Affordable housing getting infrastructure status will enable efficient supply of housing stock in the country and provide benefits associated with it," said Getamber Anand, national president of CREDAI, apex body of private real estate developers associations.
In a bid to promote the real estate sector and make it more attractive for investment, Jaitley proposed to reduce the capital gains tax liability on immovable property. Following the grant of infrastructure status, a long-standing demand of realtors, builders will now be eligible for several government incentives, subsidies, tax concessions and institutional funding for low-cost homes.
"It is positive that the real estate sector has come in the central spectrum of the Union Budget," Knight Frank India CMD Shishir Baijal said. "The real estate sector, which was the hardest hit by demonetisation move, will be one of the major beneficiaries of this budget." With surplus liquidity created by demonetisation, Jaitley said banks have already started cutting lending rates, including those for housing.
Interest subvention for housing loans has also been announced. Instead of built-up area of 30 and 60 sq metres, the carpet area of 30 and 60 sq metres will now be counted. The 30 sq metre threshold will apply only in case of municipal limits of four metropolitan cities while for the rest of the country, including in the peripheral areas of metros, limit of 60 sq metre will apply.
Significantly, first home buyers get a deduction for additional interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned during the next financial year, provided the value of the house does not exceed Rs 50 lakh.
"It is an excellent and balanced Budget. For housing it is an unprecedented Budget," said Rajeev Talwar, CEO of realty major DLF.
"Infrastructure status to affordable housing will mean cheaper cost of funding and lower tax to developers. Supply of affordable homes will increase, so prices will be lower."
Tata Housing MD and CEO Brotin Banerjee said, "Easy and dedicated access to institutional financing, higher limit on external commercial borrowings will attract more investments and assure sustained growth of affordable housing in India, making it the core driving segment for real estate. On the other hand, long term financing at lower rates will reduce costs of construction for developers allowing them to pass on benefits to consumers. The new status will increase the resource allocation for the sector, catalysing housing supply and reducing the supply gap."