“We want to buy a home, but prices are still very high and the options in the affordable housing segment remains limited,” says Seema Jain, a housewife. She continues, “The budget this year has focussed on low-cost housing and many attractive steps have been taken. For first-time home buyers like us, an increased tax exemption of Rs 50,000 on the housing loan can help a lot.”
Although prospective buyers in the low-cost housing segment may be happy with the announcements in the budget, doubts remain on what the short-term benefits would be. Over the long term, the budget is likely to improve buyer sentiment.
“The announcement of nil service tax on houses under 60 sq metres in non-metros and under 30 sq metres in metros, will boost affordable housing, as it will eventually bring down the cost of construction,” explains Dhaval Ajmera, director of Ajmera Realty.
Experts point out that the government has kept its focus on the ‘Housing For All’ mission. Most first-time home buyers target the affordable housing segment and therefore, the budget announcements are in line with the achieving this mission.
More steps required
Nevertheless, there are many who feel that the finance minister could have done more. “The demand for housing in the mid-income segment, is high. Moreover, the tax collected by the government from this sector is 10-14%. Hence, the budget could have provided some relief in service tax for houses of 80-90 sq metres (compact 2-BHK homes), as well,” suggests Vikram Kotnis, founder and managing director, Amura Marketing Technologies Pvt Ltd.
See also: Budget 2016: No short-term benefits for home buyers
Experts maintain that the Reserve Bank of India (RBI), should now take a proactive step and reduce interest rates on home loans, with particular focus on affordable housing (i.e., for loans below Rs 35 lakhs).
“Although the government did not reduce spending, the budget sent a strong message of prudent fiscal management, by not increasing fiscal deficit targets. Additionally, the government could have announced the implementation of a single-window clearance system, infrastructure status for affordable housing and incentives like higher FSI for affordable housing projects,” feels Amit Oberoi, head of valuation & advisory and research at Colliers India.
While the budget has provided sops to affordable housing projects that benefit buyers and developers, consistent growth may require additional steps such as:
- Lower interest rates.
- Single-window clearance system for projects, for faster approvals.
- Infrastructure development in peripheral areas, which could invite more affordable housing projects.
- Greater availability of land for developing low-cost housing projects, especially in metropolitan regions.
Benefits for affordable housing in the short-term
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Benefits for affordable housing over the long-term
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Amit Sethi is an accomplished professional with a distinguished background, holding an MBA in Finance. As an Independent Journalist and Data Provider with 20 years of invaluable experience, his expertise lies in meticulously covering stories on Real Estate, Personal Finance, Business and Banking. He writes journalistic content for leading media publications in India and also provides analytical data to real estate and fintech companies. Amit is driven by a purpose to disseminate insightful narratives, using verified information to empower individuals with financial literacy. Through his work, he aims to assist people in staying aware and making informed decisions that positively impact their financial well-being. Amit is a fitness freak, a marathoner and likes trekking.
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