Budget 2017-18 - Housing Segment gets pride of place
Infrastructure Status to `Affordable Housing'
This measure will allow low-cost and long-term funds for the sector, which when passed on to homebuyers, will reduce the cost of affordable housing.
The new status will augment resource allocation for the sector which, in turn, will boost housing supply and reduce the huge demand backlog.
This will also make financial institutions (lenders) look at the sector favourably, as they will have lower risk weightage in giving loans for affordable housing.
Thus, large public sector investors like EPFO (Employees' Provident Fund Organization), as well as insurance firms that are mandated to put a portion of their funds in infrastructure, will look to invest in the housing sector.
This will go a long way as a very critical supply side incentive to bring in private investment into the affordable housing sector.
This, along with subvention schemes announced for EWS and LIG housing, and recently announced for MIG housing as well, will contribute significantly towards `Housing for All' mission.
Interest subvention for Middle Income Groups (MIG)
Interest subvention for Middle Income Groups (MIG), already announced by the PM Modi on December 31, has been reiterated. This gives an interest subsidy at the rate of 4% for loans up to Rs 9 lakh for those having a yearly household income up to Rs 12 lakh, and an interest subsidy at the rate of 3% for loans up to Rs 12 lakh for those having a yearly household income up to Rs 18 lakh.
The scheme of interest sub vention for EWS and LIG housing already exists under the PMAY (U) with 6.5% interest subsidy for loans up to Rs 6 lakh.
This new policy for MIG, along with the earlier provision for EWS and LIG, will be a huge boost to the housing sector by promoting purchases with reduced borrowing rates.
Direct Taxes Benefits
Section 80-IBA (Deductions in respect of profits and gains from housing projects) was introduced in Budget 2016-17 by providing 100% deduction of profits for housing projects approved during June 2016 to March 2018.
The size of the residential unit has been modified from 30 sq m (in 4 metro areas) and 60 sq m (in all other areas other than the 4 metros) built-up area to carpet area with the same dimension.
This will broadly increase the house sizes by 30%.
The 30 sq m residential unit is to be only within the mu nicipal area of the 4 metros, from the earlier 25 sq km area (aerial) of the municipal area.
Thus even in the suburbs of metros, a residential unit size of 60 sq m will apply.
The time period for completion of the projects has been increased to 5 years, from 3 years earlier.
This has been done keeping in mind the time taken to complete the projects.
Long-Term Capital Gain Benefits
The holding period for benefits under `long-term capital gains' (LTCG) for housing and land, etc, has been reduced from 3 years to 2 years.
This will benefit homebuyers by reducing the period of holding for enjoyment of tax benefits.
The base year for determination of cost inflation index has been changed from the year 1981 to 2001.
This will help reduce the tax (capital gains tax) burden of home-owners, as they will be able to get a set-off of a higher value of their homes based on fair market value and prevent hardship in calculation of capital gains.