The finance minister’s slew of sops to boost affordable housing segment is expected to spur more such projects in the country.
However, measures such as tax deducted at source and increase in service tax will make overall cost of properties more expensive.
Among others, the FM allowed external commercial borrowings (ECB) for affordable housing projects, extended the scheme of interest rate subvention of 1% on housing loan upto Rs 15 lakh, lowered withholding tax on interest payments to ECBs from 20% to 5%, inclusion of Scheme of Affordable Housing in Partnership in service tax exemption and so on.
Tata Housing, a unit of Tata Sons; Usha Breco Realty, a unit of Usha Martin, Provident Housing, a unit of Puravankara, Value and Budget Housing Corporation (VBHC) are the major developers of affordable housing in the country.
“These are excellent steps. We would definitely encouraged to launch new projects now,” said Jaithirth Rao, chairman, VBHC, which is developing affordable housing projects in the country.
However, Rao said he has to read the fineprint on the budget proposals such as definition of affordable housing, restrictions on borrowing and so on, before making further comments.
According to experts, developers of affordable housing, who were battling rising costs and high rates, can now raise funds at almost half the rates in overseas markets. Currently real estate developers pay interest rates of around 14%.
“Developers of affordable housing projects can raise funds at 7% to 8% through ECBs, It is a big savings for them,” said Pujit Aggarwal, managing director of property developer Orbit Corporation.
Adds Anuj Puri, chairman of Jones Lang LaSalle: “This sector is typified by low margins, and it becomes attractive only if developers are enabled to produce greater volumes. Better capital availability will help in timely project execution, which will result in higher volumes,” Puri said.
Besides sops to prop up affordable housing, the Union Budget has failed to bring any cheer to the real estate sector, say property developers and consultants.
“In the absence of any clear cut steps to help realty sector, I am afraid the cost of housing will go up. Realty sector also faces a grave risk of drying up of liquidity and here again the finance minister has not done anything to mitigate the crisis,” said Lalit Kumar Jain, president, Confederation of Real Estate Developers Association of India (Credai).
Pradeep Jain, chairman of Parsvnath Developers says the application of TDS on the purchase and sale of property and increasing service tax by 2% will further add on to the overall cost of property and are bound to make property more costly in coming days.