What Budget 2015 should do for home buyers
Lots to be done to give a boost to the sector and make housing really affordable for all
Feb 21, 2015
Source : The Times of India


New Delhi: Hit hard by the skyrocketing property prices and high interest rates, owning a roof over one's head has become a distant dream for a majority of home buyers, particularly in recent years. This despite the fact that the realty segment the world over has gone through a period of prolonged slowdown.

Although sentiment around the sector has improved in the last few months -- following the recent initiatives of the Modi government and also on account of an upturn in consumer demand - a turnaround in the housing market still seems several quarters away. The government's focus on affordable housing has raised some hopes, but there are still lots to be done to give a boost to the sector and make housing really affordable for all.

Here we take a look at some important things which the upcoming Budget should do to help the prospective home buyers realise their dream.

1. Give More Impetus to Affordable Housing

The first thing the Budget 2015 can do for home buyers is to give more impetus to affordable housing. In the previous nine-month Budget, the new government outlined its vision for boosting affordable housing. "But the upcoming budget must announce clear provisions that provide a real boost to the affordable housing segment. This means that it must give more incentives to developers for creating such housing, and to end users for bu ..

Navin M Raheja, Chairman, Naredco, and CMD, Raheja Developers, also feels that since there is huge demand for affordable housing up to 60 sqmtr carpet area and there is a commitment from the government to provide housing to all by 2022, provisions of section 80IB(10) should be revived in the existing format and project funding for the sector be treated as 'priority lending' by banks and financial institutions.

"The housing unit size could be restricted to 60 sqmtr carpet area as per the definition of affordable housing accepted by the government. This is one of the significant provisions which will incentivize private sector developers to construct smaller housing units," he says.

2. Make Home Loans Affordable

According to industry experts, easing interest rates should be another focus of the Union Budget 2015-16. "The real estate industry would be positively affected by it as cutting down interest rates means an increased liquidity flow in the economy. Consequently, real estate will reap rich dividends. Moreover, if banks cut down the loan interest rates, then investing in the realty sector would become more attractive for buyers," observes Kamal Khetan, CMD, Sunteck Realty Ltd.

Currently, banks are charging interest rates starting from 10.15 per cent, which is too high. "Paying so much interest has serious implications on the family budgets of most middle-class wage earners. It is not surprising that many of them currently shy away from home loans. The Budget should bring the interest rate on home loans down to 7.5 per cent-8.0 per cent. The new government has clearly stated that it wants to make housing for all Indians a reality by 2022. But it is impossible to achieving this goal if home loans do not become affordable to all," says Kishor Pate, CMD, Amit Enterprises Housing Ltd.

3. Raise Tax Incentives on Housing Loan

Currently deduction on account of interest payment on housing loans is permissible to owners of rented dwelling units to the fullest extent. In case of the owner-occupied houses, the limit is set at Rs 2 lakh, which was enhanced from Rs 1.5 lakh vide Finance Bill 2014. Also, the deduction is available after acquisition or construction is completed and it should be within three years from the end of the financial year in which capital was borrowed.

Industry experts, however, want the deduction limit to be raised further from Rs 2 lakh to at least Rs 5 lakh to help benefit the home buyers' pockets and in turn boost sales.

"It is suggested that the deduction on account of interest payment available under Section 24(b) should be made applicable from the year in which capital was borrowed as for principal u/s 80C and should be to the extent of full interest paid, at least in respect of one house. In case this is not agreed, the limit of Rs 2 lakh should be raised to Rs 5 lakh for owner-occupied houses. Also, three years period for acquisition/completion from the year of borrowing should be dispensed with. This will provide the much-needed impetus to the housing sector which is reeling under a huge housing shortage," says Naredco chairman Raheja.

4. Give Tax Incentives to Encourage Rental Housing

The Union Budget should also give more tax incentives to encourage the rental housing segment by ways of tax incentives to those looking to rent out their residential properties.

"As of now, income generated by rent is taxed as normal income, and giving suitable tax incentives would help make the option of renting out properties more attractive. This would result in more supply of rental housing, which is a vital requirement - especially in our expensive primary cities," says Puri.

5. Eliminate Multiple Taxation on Property Purchase

The Budget should also do away with the multiple taxes involved in the purchase of residential property. As of now, home purchasers are required to pay service tax and value-added tax (VAT) on top of stamp duty and registration charges. Goods and Service Tax ( GST) should be introduced in the place of these taxes. Also, the real estate industry expects the Budget to finally make the Real Estate Regulatory bill a reality this year, so that the industry has the benefit of an apex body through which all concerns can be addressed transparently and efficiently.

6. Enable Faster Project Approvals

Developers have also been campaigning for a faster project approval process, which will beef up the supply pipeline, help bring prices down and also ensure that real estate remain viable as a business. "The Budget should provide suitable relief on this front, while simultaneously ensuring that cthat construction quality norms are not compromised in the process and that faster approvals do not result in support infrastructure failure in new precincts being developed," says Puri.

Prabhat Ranjan, CMD, Olympeo Infrastructure Pvt Ltd, is also of similar view. He says that the most-awaited single window time-bound clearance of realty projects will have maximum impact on the sector and with faster approvals, project delivery time would come down substantially, which will result into property prices going down by 10-15 per cent."

7. Making Real Estate Regulatory Bill (RERA) a Reality

The Union Budget should also make the long-pending Real Estate Regulatory Bill (RERA) a reality. "The Real Estate Regulatory bill will impose a much-needed measure of accountability on real estate developers in terms of completion timelines, quality of offerings and transparency in the sale and marketing of their products. This will provide a much-needed safety net and legal redressal mechanism for property buyers," says Puri.

8. Reduce Cost of Property Registration

Another expectation from the Union Budget is a reduction in the cost of property registration.

"The recent hike in ready reckoner rates in Maharashtra, for instance, has been a sentiment setback for the real estate sector. Stamp duty and registration costs are as high as 6 per cent in most cases, and this needs to be reduced by a few base points to aid consumers. Alternatively, a slab-based approach should be introduced. Stamp duty falls under the state government's purview, but the Center can nevertheless issue a directive to reduce stamp duty costs," says Kishor Pate.

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