The 2014 budget is out and the
speculation is finally over! How does it affect 'you', the homeowner? Will it
make your first home more affordable or more expensive? Are your EMIs going up
or down? Does the budget help the real estate sector, and therefore indirectly
benefit the prospective homeowner? The good news is that the 2014 budget has
emphasized the real estate sector, eased norms and thresholds for FDI in real
estate and encourages home buyers to invest in real estate by easing key tax
limits.
Here are a few key takeaways for
you as a home owner, or if you are planning to buy your first home.
The 2014 budget raised the
deduction on home loan interest under Section 24 from Rs 1.5 lakh to Rs 2 lakh.
Also, the total deduction allowed for interest payments under Section 80C has
been raised by Rs.50, 000, i.e. from Rs. 1 Lakh to Rs. 1.5 Lakhs but is
applicable only to self occupied properties. The raising of these two limits by
Rs. 50,000 each is an incentive to home buyers, putting more money in their
pockets. Couples planning to buy a home can take double advantage of these
benefits by buying property jointly, which would mean taking a joint home loan, jointly paying the down
payment and EMI payments. The tax benefits coupled with the availability of
better real estate options at more competitive price points due to the broader
incentives for the real estate sector will benefit the homeowner and the
industry, both.
The broader scenario…
The 2014 Budget provides a slew
of measures to encourage the expansion of the real estate sector in an
organized manner. There is an allocation of Rs. 7,060 crore for the development
of a 100 smart cities, redevelopment of satellite towns of major cities and of
small cities. This coupled with the tax pass through norms for REITs (Real
estate investment trusts) clarifying that there will be no double taxation;
will bring a much needed cash infusion to a sector that is starved of funding.
There is also a reduction in the
real estate project size required to be eligible for FDI (foreign direct
investment) from 50,000 sq meters to 20,000 sq meters, and a reduction in
minimum investment limit to $ 5 million. The result of this measure will be the
easing of funding for small and medium scale residential projects giving the
prospective homeowner better and varied choices. Relaxing FDI norms for real
estate will lead to increased availability and options in the low cost
affordable residential segment and encourage good quality small and medium
scale developers to expand their businesses.
Increased funding should go a
long way in improving and organizing the real estate industry while the
redevelopment of towns and new cities will boost the economy. On the whole the
budget of 2014 is a good move in the direction of providing housing for all, a
self professed goal of the current government.