Govt May Surprise Affordable Homebuyers With Key Announcements
If media reports are to be believed, the government is planning to expand the scope of ‘affordable housing’ by including housing projects costing up to Rs 50-55 lakh in metros from existing Rs 45 lakh. This will allow buyers in cities to avail of the subsidy being offered for such houses. Speculations are rife that this move is also expected to revive the real estate sector, which is sitting on hundreds of thousands of unsold housing units in major cities.
While Nirmala Sitharaman’s Budget 2019 did not confer on the real estate sector the much-awaited industry status but it surely will help Pradhan Mantri Awas Yojana-Urban beneficiaries to save a bit more on an affordable property bought under the scheme. Going forth, PMAY homebuyers can save Rs 1.50 lakh more taking the overall load of Rs 7 lakh off the buyer over a course of 15 years.
Important announcements related to PMAY in Budget 2019
As laid out in the previous budget, affordable housing has received an industry status and a tax holiday is already in store for builders who undertake such projects. In the case of self-occupied property, a deduction of Rs 2 lakh is already provided for interest on housing loans. Budget 2019 has paved way for an additional deduction of Rs 1.50 lakh on interest. This stands valid for loans borrowed up to end of March, 2020 only. This provision has also clarified affordable housing in terms of property as well given that it is applicable for properties worth Rs 45 lakh only. Altogether, overall deduction now stands at Rs 3.5 lakh while those repaying their EMIs over a 15-year loan period save Rs 7 lakh.
However, the developer community has been asking for further relief. “One of the areas that require immediate attention of the government is increasing the threshold value of affordable housing under the Pradhan Mantri Awas Yojana (PMAY) scheme from the current Rs. 45 lakh to 75 lakh. Today, in markets such as Bengaluru, the lands prices are high, making it unrealistic for the developers to offer homes at a price point of Rs. 45 lakh,” says JC Sharma, Vice Chairman and Managing Director, SOBHA Limited
He also suggests that approximately 85 per cent of housing units fall within Rs 45-75 lakh making the current understanding of affordable housing difficult to be accepted. He also recommends that the carpet area threshold for affordable housing be increased from the current 60 sq. mt. to 90 sq. mt. in metros and from 90 sq. mt. to 120 sq. mt. in non-metro cities, in line with the consumption trends.
Progress of PMAY-U
It is worthwhile to note that of the 81 lakh units that have been sanctioned for construction in the urban areas, 13 lakh homes have been built using new technology that helps build safer structures, efficiently. While 26 lakh homes have been completed, 24 lakh have been delivered to beneficiaries so far. About 47 lakh homes are in various stages of construction. While beneficiaries welcome PMAY-U, the progress is still slow.
Benefits outlined in the past
In the past, the government had introduced some progressive measures which will remain extended. These include the following:
- Deduction of interest on housing loans was increased from Rs 1.50 lakh to Rs 2 lakh. Now, affordable housing buyers get an added Rs 1.50 lakh.
- Developers to continue getting cent percent deduction for income from affordable housing.
- Long-term capital gains to be calculated with base year as 2001. This helps a lot of homebuyers who had bought their property prior to 2001 and may have had to pay owing to the high cost of appreciation. The Finance Act 2017 made the change possible.
- For tax purposes, long-term capital gains for immovable property will be calculated when it is over 24 months.
- Safe harbour of 5 per cent on stamp duty value was provided for the purpose of computation of capital gains on immovable property.