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Affordable home to become a reality

Friday, 11 July 2014 - 6:40am IST | Agency: dna

It is a good news for people who are looking to buy affordable homes or are burdened with high interest on home loans. The Finance Minister on Thursday announced a host of initiatives, which will further boost the real estate sector and make housing more affordable for the common man.

The budget announced an increase in income tax deduction limits under 80C, of which the repayment of principal on housing loans is a component. This limit has been raised from Rs1 lakh to Rs1.5 lakh. Additionally, the budget has also increased the deduction limit on interest payment for housing loans from Rs1.5 lakh to Rs2 lakh.

"These two factors alone will lead to a vastly improved sentiment on the housing markets," said an expert.
The budget further allocated Rs4000 crore for low-cost housing schemes. Apart from this, FM has also indicated that there will soon be a relaxation of FDI norms for the affordable housing sector.

Experts, however, feel that the government should look at faster implementation of these initiatives. "Though the government has announced such incentives for low-cost housing in the past, the real task lies in the fast execution of the fast execution of these initiatives. It remains to be seen how fast these initiatives hit the ground in real time," said Anuj Puri, chairman and country head, JLL India, in a statement.

The budget gave further indirect benefits for the residential sector by increasing the individual income tax exemption limit from Rs 2 lakh to Rs 2.5 lakh. This will increase disposable income of individuals and would have further implications on their ability to service home loans.

The government also allocated Rs7,060 crore for development of 100 smart cities. "The allocation of Rs7,060 crore of funds for development of smart cities would give a boost to large-scale township development projects," said Rohit Inamdar, senior VP, co-head corporate sector rating, ICRA.

In a move that would help in boosting developers, the FM has clarified that Real Estate Investment Trusts (REIT) would be given a tax pass-through status to avoid double taxation.
"This will help developers create liquidity and raise capital using REITs. A lot of private equity funds are looking at exiting their investments via REITs. This brings the much-needed relief to the overall cash-strapped real estate sector," said Sharad Mittal, director & head – real estate fund, Motilal Oswal.

"It will reduce the pressure on the banking system, avail fresh equity and attract long-term finance from foreign as well as domestic sources," said Brotin Banerjee, MD & CEO, Tata Housing, in a statement.

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