Real estate news on Fund window opens for low-cost houses

Commercial Properties, Investors/ Investment proposal, Price Trends, Property insurance
Posted on Mar 22, 2012
Affordable housing got a big boost in the Budget this year as finance minister Pranab Mukherjee announced measures to address the shortage in the space.

The Budget has allowed external commercial borrowing for low-cost housing and the setting up of a credit guarantee trust fund to ensure better flow of institutional credit for housing loans. “I propose to enhance provisions under the rural housing fund from Rs 3,000 crore to Rs 4,000 crore,” said Mukherjee

The minister allowed investment-linked deduction of capital expenditure incurred in affordable housing at 150 per cent, against the current rate of 100 per cent. Renting of residential dwellings and construction services relating to low-cost mass housing up to an area of 60 sq mt under the Scheme of Affordable Housing in Partnership got a service tax exemption.

Sachin Sandhir, MD, RICS South Asia, said: “For the housing sector, the Budget has exceeded expectations given the fiscal health. It has focused on affordable housing by allowing ECBs for low-cost housing.”

The interest subvention scheme of one per cent on housing loans up to Rs 15 lakh where the cost of the house does not exceed Rs 25 lakh will continue.

Tax will be deducted at source on the transfer of immovable property (other than agricultural land) at one per cent over the sum payable for transfers exceeding Rs 50 lakh in the case of properties situated in a specified urban conglomerate or Rs 20 lakh in case a property situated in any other area.

Though the sops could spur projects, measures such as tax deducted at source and increase in service tax will make properties more expensive.

“In the absence of any clear cut steps to help realty sector,” said Lalit Kumar Jain, president of the Confederation of Real Estate Developers Association of India.

“The realty sector also faces a grave risk of drying up of liquidity and here again the finance minister has not done anything to mitigate the crisis,” Jain added.

Anuj Puri, chairman of Jones Lang LaSalle, said: “This sector is typified by low margins, and it becomes attractive only if developers are enabled to produce greater volumes. Better capital availability will help in timely project execution, which will result in higher volumes,” Puri said.

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