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.
On the personal front…
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 availibility 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.