#Budget2017: More Spending Capacity Among Potential Home Buyers, But, The Wishlist Was Longer

#Budget2017: More Spending Capacity Among Potential Home Buyers, But, The Wishlist Was Longer

#Budget2017: More Spending Capacity Among Potential Home Buyers, But, The Wishlist Was Longer
You should be a member of a housing society or a co-operative society which must have at least 10 members to use 90 per cent of your PF money to buy or construct a house. (Dreamstime)

Prior to Budget 2017, DK Joshi, Chief Economist at CRISIL had commented, "Earlier, the government's focus was on investment. Now they will need to balance it with policies to boost consumption." With the amount of attention that Modi government's policies have been used to receiving, Indian home buyers were waiting for the Union Budget 2017-18 to be a big win. However, the Budget Speech did win some hearts with favourable cuts in tax rates.

Those with incomes in the range of Rs 50 lakh to Rs 1 crore per annum would be liable to pay a surcharge of 10 per cent while other segments shall avail of a uniform benefit of saving up to Rs 12,500 per annum. Tax pressure has, therefore, been halved. However, much to our dismay, the more crucial aspects did not find a mention in Arun Jaitley's speech.

Despite the announcements by many banks about lowering their lending rates, buyers did not show visible enthusiasm about investing in property. State Bank of India, Union Bank of India, Punjab National Bank, ICICI Bank, Kotak Mahindra Bank, Andhra Bank, Oriental Bank of Commerce, Indian Overseas Bank, Citi India, Syndicate Bank, Dena Bank and Bandhan Bank have all slashed interest rates. Prospective buyers still remain unaffected. This could be for two reasons — buyers were waiting for further sops to be tabled during the Budget or perhaps the lowering of interest rates is just not enough to boost sentiments.

This was what we expected from Finance Minister, Arun Jaitley's Budget this year:

  • The highest amount eligible for tax deduction is Rs 1.5 lakh and is bludgeoned with other deductions such as fixed deposits, equity-oriented mutual funds, national savings certificate, senior citizens saving schemes, etc. A separate cap for housing loan could have been encouraging.
  • Increased deductions under Section 80C of the Income Tax Act from Rs 1.5 lakh to Rs 2 lakh would be helpful, too.
  • Tax deduction for interest paid on housing loans should be increased to Rs 3 lakh. Such deductions should be in sync with inflationary levels.
  • House insurance premiums should be allowed for deductions, too. At a time when poor urban planning or accidents such as fire can cause harm to property, a second home may be out of reach for many. Thus, potential buyers expected this.

Also read: Want to make the most of interest rate cuts? 

What could make housing more attractive? 

Home buyers forced to settle for lower tax benefits due to delays at the developer's end should be attended to.

What could have bridged the gap between income and property prices?

In most metros, property today is not affordable for an average salaried home buyer. As a result, people keep waiting for years if they want to invest in prime properties in metropolitan cities. This calls for tax deduction limits to be framed based on the property values in cities. Tax deduction limit for housing loans should be higher for those living in metropolitan cities where ticket sizes are on the higher side.         

Besides, interest rate subventions for urban areas are also expected to trigger the market.

Last Updated: Mon Feb 06 2017

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