Union Budget 2017-18: 'Affordable housing positive for developers & banks'

Jayashree Kurup, Head of Content & Advisory- Magicbricks.com

"Affordable housing being given Infrastructure status is a welcome move and will help in the Housing to all by 2022 mission – it is a big and positive move for developers, banks and housing finance companies. Special funds under Pradhanmatri Awas and refinancing by NHB will help more developers to enter the sector and to boost affordable housing for a large number of home buyers.  The one year rental tax relaxation for new properties with occupancy certificates will help developers use the year to sell off the stock which can be held as stock in trade. The taxation on vacant residential property is likely to bring down the number of vacant housing units across the country by unlocking them for rental housing.  The Budget fine print indicates the biggest tax arbitrage via setting off loss from second home has now gone away. However the effect of this is not so positive for the individual buyer. Earlier an individual could buy a second home on mortgage and show a loss via differential between interest paid on mortgage minus rent received from the property. The loss could be adjusted against income from salary or other income. Now the adjustment has been restricted to Rs 2 lakh only, which is miniscule for individuals with high income. The provision is negative for real estate sector as it may discourage investment in second property to save tax, especially by salaried class. The government’s focus on developing multimodal infrastructure including rail, roads, ports, airports and waterways will not only help to decongest urban areas but also help in the development of new industrial cities around our industrial transport corridors.  Affordable housing area criteria based on carpet area instead of built-up area will give buyers the benefit of larger units within the same 30 and 60 sq m units.  Rural housing has got a big boost this year which should stem the influx into cities."