Property Plus

Big boost for affordable housing

The much-awaited annual event of the Indian economy – the Union Budget — is now over, and it is time to take cues from the announcements and move ahead. The Finance Minister has put the right foot forward by taking an all-together different approach towards growth of the economy by focusing on rural, manufacturing and infrastructure development.

The individual tax rates remain unchanged. If your taxable income is under Rs.5 lakh, the tax rebate has been pegged at Rs.5,000. Further, under Section 80GG of the Income Tax Act, on account of rent paid by an individual the same has been increased from Rs.2,000 per month to Rs.5,000 per month (for those who do not receive HRA benefit).

The biggest takeaway has been for the first time home buyers who take a loan of up to Rs.35 lakh. The interest component of Rs.50,000 can be claimed as tax exemption. This allowance is over and above the existing allowance. But the total value of the property should not exceed Rs.50 lakh to get this additional tax benefit. This move is expected to bring smiles on the faces of those who seek affordable housing; and considering that prices are not getting cheap to own a property, this additional exemption would boost the buying interest in real estate.

Going forward, the focus from the Budget would shift to Reserve Bank of India whose monetary policy announcements would be eagerly awaited, and the same is due shortly. It is widely expected that the Governor might bring down the interest rates (key policy rates) marginally by 0.25% which would be a positive beginning for the new fiscal year 2016-17.

As indicated by the Finance Minister during his Budget speech, a Monetary Policy Committee (MLC) would be institutionalised during the coming financial year, where decisions on interest rates and related matters would be collectively taken by the committee rather than by the RBI as a single entity. It would be rather interesting to see how they (Government & the Central Bank) walk together.

With back-to-back years of poor monsoon and unseasonal rains in most part of the country last year, several measures of the government had suffered. But the steep drop in crude oil prices almost balanced the negatives and positives for the economy. Inflation too was in moderation.

This year, if the monsoon is normal and crude prices remain where they are, inflation would not be a concern at all. If this is achieved, interest rates could look further south and a low interest rate regime would prevail. We may even see the home loan interest rates at 8% or less.

With such a conducive environment, the real estate segment would largely benefit considering that housing is one of the most sought-after investments. With low interest rates, better tax benefits and low inflation, the buoyancy would be palpable and the segment would cherish the situation.



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Printable version | Feb 28, 2021 3:57:01 AM | https://www.thehindu.com/features/homes-and-gardens/big-boost-for-affordable-housing/article8314019.ece

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