Push for Affordable Housing in Budget 2016

The Union Budget for 2016-17 was much awaited with plenty of expectations. The Budget has a significant rural focus. There are some welcome measures initiated towards pushing the realty sector.

Push for budget homes

In line with the mission 'Housing for all by 2022', the Budget has provided for a 100 percent deduction against profits from a housing project with units of up to 30 sq mts (300 sqft) in the four metro cities and 60 sq mts (600 sqft) in other cities, that are approved between June 2016 and March 2019, and completed within three years of the approval. This will give a major push to the affordable housing segment.

Higher interest deduction

Property in ThaneThere is some good news for first-time homebuyers. The Budget has proposed an additional Rs 50,000 in deduction against interest paid on a loan for first-time homebuyers. This tax deduction is for a loan of up to Rs 35 lakhs sanctioned during the next financial year, provided the value of the house does not exceed Rs 50 lakhs.

This measure is expected to encourage more prospective buyers to invest in property. As it will reduce the cost of a loan effectively; it is expected to boost demand for housing in the budget and mid-segment categories.

This additional deduction of Rs 50,000 will significantly benefit first-time homebuyers in Tier II and Tier III cities too.

Duty exemption

The Budget also extended an excise duty exemption, currently available to concrete mix manufactured on site, to ready-mix concrete too. This is expected to lower the cost of construction for developers.

A service tax exemption has been announced on construction of affordable housing under State and Central housing schemes. Builders will get 100 percent tax exemption on profits if they build units of up to 300 sqft in the four metro cities and up to 600 sqft in the other cities. This will give some much-needed impetus to develop a greater number of affordable housing projects across the country.

The tax sops for first time homebuyers and incentives on development of affordable housing projects will push demand in the property market.



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