The much-awaited event — Union Budget 2010 — is behind us. This budget was crucial in that there were expectations of some rollback in stimulus measures as the economy is growing at a good rate. And a week later, homebuyers will find the incremental disposable income in their pockets useful as it makes EMIs that much easier to repay. For those waiting for a trigger, it is the push to go for a home now. Another factor that came as good news is the status quo on the home loan interest rate front. The last Credit Policy review hiked the cash reserve ratio for banks but the ample liquidity in the system and keen competition among lenders is holding the interest rates steady. As the growth forecasts for the economy hover around the eight percent mark, job security is gaining ground. The IT sector is faring well, especially in the segment catering to domestic demand. These factors point to consumer confidence looking up in the coming financial year. While the price
correction in the property price that came following the sub-prime crisis brought house within reach of many more, the job insecurity was a wet blanket. Now, on the one hand, the sentiments have improved, and on the other, there is the new dimension of affordable housing that the slowdown evolved. This new segment in the property market is bound to find more potential homebuyers in the coming financial year as the new income tax structure comes into effect.
Budget and realty
The budget has an emphasis on promoting housing. The measures include: Interest subvention scheme extended The interest subvention scheme has been extended up to March 31, 2011. This move is aimed at boosting affordable housing. The Finance Minister has also proposed an extension of the one percent interest subsidy scheme to March 2011. The government had introduced this scheme in the last budget to promote low-cost housing. Under this scheme, borrowers will be given a one percent subsidy on the first 12 equated monthly instalments (EMIs) to be paid to the bank. This subsidy on housing loans up to Rs 10 lakhs, and where the cost of the property is under Rs. 20 lakhs, helps the cause of affordable housing. This along with the restructuring of the income tax slabs for individuals helps those looking at low-cost housing.
Tax holiday deadline extension
The extension of the deadline for completion of pending housing projects by one year for the tax holiday under Section 80-IB given earlier helps developers. The relaxation in norms for built-up area of shops and other commercial establishments in such eligible housing projects is also beneficial.
Allocation for development
There is an increased budgetary allocation for urban development and housing schemes. The investment-linked deduction benefit for convention centres located in the NCR has been extended till July 31, 2010. This is for deduction under Section 80-ID. The time limit for completion of projects eligible for deduction under Section 80-IB has been extended to five years. The more liberal limit to commercial space that could be created in such projects will also help.
Central registry
The budget has set aside Rs 25 crores for a Central Electronic Registry. The Central Electronic Registry (CER) will be a database of all mortgages and banks that have a charge. So, in future, when a borrower seeks to avail a loan against property, the lender will be able to verify whether anyone has a charge on the property already.
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