The maiden budget presented by the NDA Government has been quite productive for the real estate sector, including some goodies doled out for home loan borrowers. Since a lot of expectations were built around the wants and needs of different industries (pre-budget) it may have not have been a good budget for everyone. However, in the face of adversity our economy has been facing over the last couple of years, this is the best the government could have done under the given circumstances.
* The budget raised the personal income tax limit from Rs. 2 lakh to Rs.2.50 lakh which provides greater saving, investing and spending opportunities for people with lesser tax outgo.
* The exemption on interest component on home loans has been increased from Rs. 1.50 lakh to Rs. 2 lakh per year. People would be motivated to invest in bigger and better homes leading to a comfortable lifestyle and it provides more disposable income in their hands due to tax saving. This is a positive for banks and financial institutions as well who can expect increased lending opportunities.
* This budget also proposes to introduce the long pending Real Estate Investment Trust, popularly known as REITs, which can be a game changer in many ways. A well accepted concept in developed countries, it offers a great alternative income earning opportunity beyond debt, equity and commodities. The commercial real estate landscape is going to change in a huge way in the coming years when this concept gets introduced, which is to be finalised and approved this fiscal year.
Real estate developers would be able to access large amounts of funds from other than traditional sources such as banks and financial institutions which would be mutually beneficial for investors as well as builders. Investors can invest an amount as low as Rs.2 lakh (expected entry level investment amount) and get a “share” in large-sized property. The concept works like mutual funds where the benefits by way of rental income and property price appreciation would be appropriated on pro-rata basis to investors.
Interest ratesThere is nothing positive on interest rates since inflation is still hovering in an uncomfortable zone and the RBI is expected to maintain status quo on the rates over the medium term.
Builders and financial institutions are expected to offer good discounts and competitive interest rates to attract investors and borrowers in the wake of increase in tax limit and interest component exemption. It is time to shop around and get the best deal which also leaves some extra money in your wallet.
