A confidence boosting budget for real estate
Pranab Mukherjee’s budget 2010-11 clearly is development focused. It has promised a huge outlay for Infrastructure development – specifically road networks, power generation and housing. For rural housing the government has increased planned allocation to Indira Awaas Yojana and Rajiv Awaas Yojana
The urban real estate sector has seen some improvement only in the last 6 months after year-long lull. Budget 2011 has some positives for the Builders as well as Home Buyers. For builders, the Tax exemption for pending projects has been extended to 5 years from current 4 years, which means even if there are delay in completion of projects Builders will get the tax benefit. The limit for commercial property within residential projects is increased to 3% from the current 2%. This is a welcome change for builders since commercial property sells at higher prices than residential property. Also, the allocation for slum redevelopment is increased to Rs 1,270 crore. Builders focused on affordable housing will gain due to the increased allocation.
For home buyers the budget has extended the 1% subsidy in interest rate for housing loans upto 10 lacs till March 2011. This gives a fillip to the affordable housing sector which badly needs this stimulus. The best thing the FM has done from the individuals’ perspective is to up the income tax slabs without increasing the income tax rates. Person earning Rs. 8 lacs per annum (which account for almost 67% of home buying population) will take home Rs 50,000 more from next financial year. This is a substantial reduction in tax liability which will ultimately mean higher disposable incomes and affordability. Consumers will be more secure and confident in making property purchase decision with increased disposable incomes in their hands.
We at makaan.com see this budget as giving renewed thrust to affordable housing. Measures announced in the Budget should improve supply of affordable housing. Cheaper loans on affordable housing, lower income taxes and rebate on housing loan interests, means that in 2011, the aam aadmi will fulfill his dream of owning a house in his city.