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The Finance Minister announced the annual budget in Parliament. Here is a closer look at Pros and Cons for home buyers and the real estate industry on the basis of the budget:
Pros for customers and real estate sector:
1: The higher fund allocation of Rs 6k crore rural and Rs 2k crore urban fund is likely to trigger greater home owernship.
2: Higher interest deduction of Rs 2.5 lakh on home loans upto Rs.25 lakhs is a positive for those who are looking to buy budget homes. The deduction is applicable on loans from banks and non-banking financial companies (NBFCs).
3: Infrastructure has received a major thrust, especially transport and energy segment. The steps to increase funding for roads, highways and other infrastructure will surely add more terrain on the Indian realty map taking tier 2 and tier 3 cities on new growth trajectory.
4:Opening up of the ‘External Commercial Borrowing’ (ECB) window for affordable housing will ensure better capital availability for developers of low-cost housing and boost the overall sector which is characterized by low margins.
We believe the budget would give a welcome impetus to budget housing, first-time home buyers and to some extent, boost demand in smaller cities like Trivandrum and the distant suburbs in metros.
Cons for Customers and Real estate sector:
1. The finance minister has also proposed to reduce the abatement in service tax from 75% to 70% for homes that cost Rs.1 crore or above, or are 2,000 sq. ft or more in size. This translates into an increase in service tax outflow, which means that luxury housing will become more expensive. For a city like Trivandrum 1crore plus apartments and villas are less than 10% of any given project at the moment, hence this would not be a significant influence for the local real estate market. However for metros where projects might be 50% or even 100% composed of luxury homes exceeding in 2000 sq ft, this announcement might act as a dampener in customer sentiment and not help the already slow sale rates in metros.
2. Another announcement is that tax deducted at source (TDS) of 1% to be charged on the transfer of immovable property is aimed at curbing speculation and improving reporting and accountability in high-value transactions. TDS is to be charged on the gross transaction value rather than net gains, hence sellers will have a cash-flow impact in situations where the sales are at a loss or at zero/negligible gains.
Pros for customers and real estate sector:
1: The higher fund allocation of Rs 6k crore rural and Rs 2k crore urban fund is likely to trigger greater home owernship.
2: Higher interest deduction of Rs 2.5 lakh on home loans upto Rs.25 lakhs is a positive for those who are looking to buy budget homes. The deduction is applicable on loans from banks and non-banking financial companies (NBFCs).
3: Infrastructure has received a major thrust, especially transport and energy segment. The steps to increase funding for roads, highways and other infrastructure will surely add more terrain on the Indian realty map taking tier 2 and tier 3 cities on new growth trajectory.
4:Opening up of the ‘External Commercial Borrowing’ (ECB) window for affordable housing will ensure better capital availability for developers of low-cost housing and boost the overall sector which is characterized by low margins.
We believe the budget would give a welcome impetus to budget housing, first-time home buyers and to some extent, boost demand in smaller cities like Trivandrum and the distant suburbs in metros.
Cons for Customers and Real estate sector:
1. The finance minister has also proposed to reduce the abatement in service tax from 75% to 70% for homes that cost Rs.1 crore or above, or are 2,000 sq. ft or more in size. This translates into an increase in service tax outflow, which means that luxury housing will become more expensive. For a city like Trivandrum 1crore plus apartments and villas are less than 10% of any given project at the moment, hence this would not be a significant influence for the local real estate market. However for metros where projects might be 50% or even 100% composed of luxury homes exceeding in 2000 sq ft, this announcement might act as a dampener in customer sentiment and not help the already slow sale rates in metros.
2. Another announcement is that tax deducted at source (TDS) of 1% to be charged on the transfer of immovable property is aimed at curbing speculation and improving reporting and accountability in high-value transactions. TDS is to be charged on the gross transaction value rather than net gains, hence sellers will have a cash-flow impact in situations where the sales are at a loss or at zero/negligible gains.
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