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Low interest rates for affordable housing in the offing

Wednesday, 9 July 2014 - 6:30am IST | Place: New Delhi | Agency: dna

The NDA government's first budget is likely to shower some benefits on the affordable housing segment in line with Prime Minister Narendra Modi's conviction to provide housing to everybody by 2022.

The benefits are likely to come in the form of lower interest rates for the affordable housing segment, and low-income segment, which will also spur demand for allied sectors such as cement and steel. Also, the government may also provide heightened income tax benefits on home loans.

"The government is examining a proposal to bring down the rate of interest on home loans in certain sectors. Providing higher income tax benefits from the current Rs 150,000 on interest payment is also on the cards. All these measures are meant to ensure money flow into the real estate sector," said an official close to the development.

The official said the government is considering a 6% rate of interest on home loans for a small segment of 'first time, low income' home buyers.

It cannot however, be implemented on a large scale, given the inflation scenario, which has constricted the space.

Also on the cards is special benefit to the developers for development in particular areas such as alongside the Delhi Mumbai freight and industrial corridors as a part to expedite the creation of 100 new cities, which is high on the agenda of the government.

The official told dna, "No new cities have been created in the country after independence. De-bottlenecking the existing cities is high on the priority of the government." The official, however, denied sharing the details of the incentives developers will get in these areas.

Industry and experts, meanwhile, is looking forward to industry status, faster clearances and streamlining the FDI.

Brotin Banerjee, MD, Tata Housing, said, "There is a need to confer industry status on the realty sector, make provision for single-window clearance and establish a regulatory authority to ensure planned and transparent development in the interest of the customers."

"Excise duty reduction on cement and steel will lower project costs, and expansion of interest subsidy on loans will boost developers' interest in this segment. Moreover, tax measures such as increasing the limit of interest deduction on home loans will motivate buyers and revive demand in the value and affordable segment," he said.

FDI relaxation in the sector is also high on the industry radar.

"The government can look at bringing down the minimum capitalisation requirement from $10 million at present to $5 million. We also feel that the minimum area to be developed in case of serviced housing plots should be reduced to 5 hectare from 10 hectare, while in case of construction-development projects, a minimum carpet area of 20,000 sq metres should be introduced instead of the existing 50,000 sq mt built-up area in cities having population of more than one lakh," said Sachin Sandhir, MD, (South Asia), Royal Institution of Chartered Surveyors.

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