Finance Minister P. Chidambaram announced a series of measures for the real estate sector in the 2013/14 Budget, but failed to lift the spirits of prospective buyers bearing the brunt of high property prices. He has proposed an additional deduction of Rs 1 lakh on interest paid on housing loan; this takes the total deduction to Rs 2.5 lakh for loans up to Rs 25 lakh.
However, experts said the benefit of the proposal would be limited because property prices have shot up in the past five years and there are only a handful of projects that offer flats around this price "Clearly, a large chunk of buyers are not going to benefit from this proposal. It would have made sense if the finance minister had kept the loan amount at Rs 35 lakh," says Anshuman Magazine, Chairman & Managing Director of real estate consultancy CBRE South Asia. Sanjay Dutt, Executive Managing Director (South Asia), Cushman & Wakefield, also says the decision is not going to benefit all home buyers. "It's intended to benefit a certain section of people who fall in the middle or lower income groups."
The Budget was also silent on the industry's demand for infrastructure sector status which would give the affordable housing segment a host of benefits, including lower interest rates. Currently, interest rates for realty developers vary from 12-16 per cent. Infrastructure companies, on the other hand, pays 6-7 per cent interest.