Finance Minister P. Chidambaram’s Budget may have failed to live up to the expectations of the realty sector as far as direct initiatives were concerned, but realtors believe that one cannot ignore the fact that this is a promising Budget.
Middle-class home buyers have reason to celebrate the Budget. In order to promote home ownership, Chidambaram has proposed an additional deduction of up to Rs 1 lakh on interest when a person buys his first house with a loan of up to Rs 25 lakh from a bank.
But the catch here is that the property should not cost more than Rs 40 lakh. This implies that it is not very attractive offer for those in the metros. However, it will meet the requirement of most home buyers in small cities or distant suburbs.
To address the issue of country’s acute urban housing shortage, the Finance Minister announced dedicated funds of Rs 6 lakh crores for rural housing. This along with infrastructure investment would to some extent solve the housing shortage.
According to the Ministry of Housing and Urban Poverty Alleviation report, the housing shortage for the Economically Weaker section stands at almost 1.055 crore homes or 56.2 per cent, while that for Lower Income Group is at 74.1 lakh homes or 39.5 per cent.
Seeming to work towards the goal of ‘slum free India’, he announced setting up of an Urban Housing Fund with a corpus of Rs 2,000 crore. This fund will be set up by the National Housing Bank and will help bridging the huge gap of 18.78 million houses.
Well-heeled home buyers, on the other hand, were not very excited by what Chidambaram brought to the talbe. The Budget has proposed a 1 per cent tax deduction at source on the value of the transfer of immovable property, where the market value exceeds Rs 50 lakh.
Not only will premium housing now become more expensive, but it will also require a lot of paperwork for buyers. In order to purchase an immovable property, now a Tax Deduction Account Number (TAN) is mandatory.
Chidambaram has also lowered the rate of abatement on homes and flats with a carpet area of 2,000 sq ft or more or costing Rs 1 crore and above from 75 per cent to 70 per cent . This will increase the service tax substantially. For a house of Rs 1 crore, at 70 per cent, the service tax liability will increase to Rs 3.6 lakh from the present Rs 3 lakh.
The Government has taken certain firm measures in this year’s budget to overcome many problems in the sector. However, proper implementation of these measures is an uphill struggle.
(Nikunj graduated in History from Jesus and Mary College, Delhi University. He is now studying at the Asian College of Journalism, Chennai.)