Union Budget Provisions for Affordable Housing
All eyes were set on the finance minister Mr. Arun Jaitley as he presented the Union Budget 2017-18. The government had already made favourable moves by setting up RERA and making the bold move of demonetising Rs. 500 & Rs. 1000 currency. But the real estate sector and especially the middle-class was hoping for a lot more from our finance minister. And he did not disappoint at all.
The Union Budget of 2017-18 made quite a few pleasing provisions for the affordable housing sector. Granting, infrastructure status was inarguably one of the most anticipated provisions. Since a long time, builders had been rallying to grant infrastructure status to affordable housing and their constant efforts bore fruit this year.
Here’s everything you need to know about the union budget and its provisions for the affordable housing sector -
Infrastructure status: Since real estate wasn’t included in the industries’ category, the builders had to avail loans at a higher interest rates. The infrastructure status will now make them eligible to get loans at a much lower interest rates. This will reduce the overall cost of the project and in turn, reduce the property prices as well.
Instead of built-up area, now the carpet area of 30 sq. mtrs and 60 sq. mtrs will be applicable for affordable housing. The 30 sq. meter limit 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, the limit of 60 sq. meter will apply. This move will definitely boost the volume of construction activity across the country. – it brings in tax benefits and will bring in more investment The government has also extended the time of completion of such projects from 3 years to 5 years.
Affordable housing developers will also be eligible for government's incentives, tax benefits and institutional funding. The status could also mean that the government may release land specifically for affordable housing development in central locations of major urban centres in India. This move will propel growth in the segment and lead to higher consumption.
Notional rental income: Tax payment on notional rental income on completed residential projects has also been deferred by one year after receiving completion certificate.
Low interest rates: After demonetisation, banks have already reduced the interest rates on loans. Though the budget missed out on announcing any further relief in interest rates, the prime minister has already announced interest subvention of 4% and 3% on loans up to Rs. 9 Lac and Rs. 1.2 Lac respectively. This will definitely make buying a home even more affordable.
Pradhan Mantri Awaas Yojana: The budget also proposes to complete 1 Cr. houses by 2019 for the houseless and those living in kutcha houses. Allocation to Pradhan Mantri Awaas Yojana Gramin was also raised from Rs 15,000 crores in 2016-17 to Rs 23,000 crores in 2017-18.
How will the Union Budget benefit the buyers?
Apart from the infrastructure status that will reduce property prices, buyers will also benefit from the following -
- Tax reduction: The budget has proposed to reduce the tax rate of individuals earning between Rs 2.5 lakh to Rs 5 lakh to 5% from the current 10%. The income tax has been reduced from 10% to 5%. This move will encourage small investors to invest more in real estate.
- Transparency: The budget has proposed to ban cash transactions over Rs. 3 Lac. Demonetisation has already made this sector a lot more transparent than it was, and this move will further ensure that transparency is maintained in the long run as well.
- Finance: Loans worth Rs.20,000 Cr will be refinanced by the National Housing Bank. This move will not only give a green signal for the previously unapproved projects, but will also encourage the builders to come up with more projects. As there will be more projects on offer, buyers will get more affordable housing options to choose from.
If you are looking to buy a home, this is the right time. Don’t miss this opportunity to avail the multiple benefits offered by the Union Budget and buy the home of your dreams.
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