The demand for housing units that are worth up to Rs 45 lakhs is sure to rise as the additional tax deduction of Rs 1.5 lakh has been announced in the Union Budget, on the interest paid on housing loan for first time home buyers. At the same time, there has been a call to promote rental housing and also improve the liquidity of the NBFCs. There are, of course, others, that the real estate sector was not given industry status and there was no stress fund created for the projects that were stalled. There are also those who are not happy with the cap of Rs 45 lakhs on the tax deduction for home loan interest. The new rule will definitely provide thrust to the real estate sector and also provide relief to those with low budget but the cap of Rs 45 lakhs was unnecessary, according to many industry experts. They have requested that the benefit be extended to all home buyers without any kind of cap on the price of the property.
It has been perceived that the Government’s initiative to promote Housing for All had been a success in almost all major cities, except in Mumbai, where there is a paucity of land. Liquidity has also been a cause of concern for the realty sector and that issue has been addressed a little in the recent budget. The industry experts are also hopeful that the demand of the CREDAI, the apex realty body in the country, has finally been met to an extent that the archaic laws should be reformed that public housing should be promoted on government land and the basics of the law were outlined in the Budget.
Things to ponder over
According to experts the tax deduction, along with the model tenancy law besides proper investment, in the Pradhan Mantri Awas Yojana, has all contributed towards the success of the housing market in recent times. Several experts, however, are still rueful that there was nothing about a stress fund that could help stalled projects start working again. The stress had only been of affordable housing and with the additional CLSS scheme, along with the tax benefits, the unsold inventory is also very likely to be sold. On the other hand, seasoned industry experts are hopeful that the new tenancy laws will bring some transparency to this highly unorganized segment.
Several, however, agree that the Union Budget this time, was a mixed bag and this came at a time when the segment was showing signs of revival. Those who were simply biding their time waiting for some kind of development that would provide relief would now make a move and go ahead with their home purchase. The building liquidity concerns should have been handled in a better manner, according to many.
Bankers and investors are more concerned about liquidity and in the light of the present NBFC crisis and tough market in the residential segment, the bank funding will have a major role to play. The tax incentive will likewise, help the cause.
The housing segment in the rural sector is also going to get a boost since it is there that most of the affordable homes are being built. The suburbs are also coming up and with the government extending its support to the NBFC, the financing of home purchase would be made easier. Those who are of the opinion that the tax benefits should have been extended to everyone, without the cap of Rs 45 lakhs, think that the issues like single window clearance and industry status demands were not taken into account. Moreover, the thrust has only been to low-income housing and the middle-income housing has been completely ignored and had that not been the case, more units would have sold that would have given the real estate sector the much-needed thrust that it had been waiting for a long time. The tax benefit for the low-income group only was just half the job done and there is scope for widening this benefit and give the industry the much-needed boost.