The supply of affordable homes is expected to get a boost with the finance minister’s proposal to allow 100% deduction for profits to projects for building homes up to 30 sq m in the four metros and 60 sq m in other cities.
The demand for affordable homes constitutes about 90% of the total demand for homes in India. The deduction has been given for projects approved between June 2016 and March 2019, and completed in three years.
Builders and real estate experts say this exemption would bring in a 15-20% upside on profits for a developer after paying MAT, making it easier to attract foreign and domestic investment for housing projects.
The Budget has also proposed service tax exemption on construction of affordable houses up to 60 sq m under any government scheme.
It also offered first-time home buyers a deduction for additional interest of Rs 50,000 per annum for loans up to Rs 35 lakh sanctioned in 2016-17, where house cost does not exceed Rs 50 lakh. “This will push developers to redeploy money into building more affordable housing,” said DLF CEO Rajeev Talwar. “This will bring in much greater supply, spur construction activity and employment connected to it.”
Getamber Anand, national president of Confederation of Real Estate Developers’ Associations of India, said there has been a lot of rationalisation of taxes.
“Small pain points like harassment by excise department on ready-mix concrete being manufactured on site for self use have been addressed,” he said.
“The enhanced home loan interest deduction will further encourage buyers to invest more in this segment,” said Ashish Puravankara, MD of Puravankara Projects.