How Will the Budget 2018 Help Mumbai Home Buyers?

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How Will the Budget 2018 Help Mumbai Home Buyers?

Will the Budget 2018 Help Mumbai Home Buyers

Over the past two years, India’s real estate sector has witnessed a slew of policies and reforms being announced and implemented. The primary aim of these was to promote growth and increase transparency to improve the overall economic growth of the country.

During the year 2017, the successful roll-out of focused reforms including the establishment of a real estate regulator (RERA), implementation of India’s biggest Tax reform, the Goods and Services Tax (GST), relaxations in the annual budget for affordable housing projects, incentives under the PMAY (Pradhan Mantri Awas Yojna) scheme and further relaxations in carpet area for affordable housing units have provided a much-needed thrust to India’s housing market. The results of these various reforms are already being felt across the country’s economic landscape. Among the 190 countries surveyed in World Bank’s Doing Business 2018 report, India saw an improvement in its ranking from 130 in 2017 to 100 in 2018.

Related: What is the Impact of RERA on Real Estate Prices in Mumbai?

Key aspects from the Union Budget 2018 that will Assist Mumbai Home Buyers

To facilitate an increase in activity across the housing market, the central government leads the way and rationalizes stamp duties for union territories. The Centre should also nudge individual states to make the process of property tax assessment and collection simpler. This would go a long way in improving end-user sentiment and encourage investments in the segment.

Key Elements:

  • Tax benefits under Section 80-IA and Section 35AD to be extended to integrated township projects by including the same within the definition of infrastructure facility.
  • Affordable housing will be fully exempted from service tax under GST, in view of the Government’s flagship scheme ‘Housing for all by 2022’.
  • The budget focuses on aspects such as offering land at subsidized rates, enhanced FSI’s for affordable housing, tax incentives and rebates on construction materials.
  • Encouragement to private developers to enter into the segment, ancillary support in the form of increased funding to National Housing Bank for cheaper mortgages, standardized costs of building materials, faster approval processes, and a targeted fund allocation for low cost housing projects would go a long way.
  • Home buyers can claim deduction up to Rs. 2 lakhs towards home loan interest under section 24 of Income Tax Act.
  • Homeowners can accumulate interest expense and claim it in five equal instalments from the year the construction is completed.
  • In case of property given on rent, the loss from house property can be claimed up to Rs. 2 lakhs in a financial year.
  • The repayment of a principal portion of the home loan is eligible for deduction under section 80C to the extent of Rs. 1.5 lakhs. Apart from home loan, section 80C’s 1.5 lakhs limit also includes certain other investments like LIC, PPF, Life Insurance Policy, etc.
  • The current rate of interest on home loans is at an all-time low. Home buyers would prefer to see this rate sustained or lowered furthermore.

Related: The RERA Effect on the Real Estate Industry

Under Section 54 of the Income Tax Act, capital gain benefits are made available to buyers, who sell their property and acquire a new one, within a stipulated period of time. However, if the possession is not provided on time, there is a penalty on the developer under the RERA, but no benefit to the buyer who still has to pay the heavy tax. With the government already looking forward to the 2019 general elections, there may also be some marginal relief given to the middle class. Finding a balance between farm growth and infrastructure growth, would more likely be the key focus of the government, a year before the elections.

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