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'Budget 2017 must focus on housing, infrastructure for pro poor thrust'


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Read more about Budget 2017 may look to soften note ban woes by tax relief on Business Standard. Jaitley may raise deduction limit for interest paid on home loans to Rs 2.5 lakh from Rs 2 lakh

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'Budget 2017 must focus on housing, infrastructure for pro poor thrust'

  1. 1. 'Budget 2017 must focus on housing, infrastructure for pro-poor thrust' Considering that the welfare of the poor and middle class is the priority area of the government and the assembly elections manifestos of all the major political parties centre around housing and urban development, this year's budget is expected to give a major thrust on real estate housing & infrastructure. The Budget 2017 should be seen in the backdrop of a tough year for real estate and housing, with the problem of weak sales and high unsold inventory getting further precipitated by demonetisation. It's a matter of concern that the sale of housing units declined by 10 percent in the six month period ending September 2016. This poses a major challenge to NDA government's flagship programme of 'Housing for All', as housing besides infrastructure, is a major booster to GDP especially in a slowdown economy and has a multiplier effect on allied sectors. It's time to build on the foundation of structural and institutional reforms, addressing the vital issue of seamless implementation of key reforms like Real Estate Regulation Act
  2. 2. (RERA), Smart Cities Mission, REITs (real estate investment trusts), GST and Bankruptcy Act and carry out the unfinished reform agenda of 'Ease of Doing Business and Single Window Clearance'. As the government is rightly giving boost to affordable/low-cost housing for the success of its 'Housing for All' mission,the budget needs to come up with policy initiatives/incentives to give a fillip to affordable and low cost housing by way of direct benefits to home buyers, resulting in enhanced affordability. In order to widen the scope of interest rebate on affordable housing,there's a need to enhance the 30 sq mtr area limit of houses, especially when the government has already broadened the scope of interest subsidy under Pradhan Mantri Awas Yojana (PMAY) by enhancing the loan eligibility limit from 6 lakh to 12 lakh by creating two additional loan slabs of 9 lakh and 12 lakh with interest subsidy of 4 percent and 3 percent respectively. Furtther, as the government's focus is on rural development, one can expect hike in outlay for Pradhan Mantri Gramin Awas Yojana (PMGAY) under which 10 million houses are to be built over the next two years. Hike in budgetary allocation for affordable homes and increasing the FSI/FAR also needs to be addressed. Amidst price rationalisation and lowering of interest rates,the budget may well provide direct tax incentives by increasing the exemption limit under 80C along with revival of standard deduction to benefit individual tax payers, considering that the Finance Minister Arun Jaitley has already said that demonetisation gains may be used to fund tax- friendly budget. This will give more disposable income in the hands of home buyers to boost housing. As part of tax bonanza,home buyers can expect hike in deduction limit of interest paid on housing loan. While there could be some tax incentives for first time home buyers, the government may on the other hand do away with tax incentive on the sale of residential property by a person already owning more than two homes.Read more