After feeling left out in the Union Budget of 2009-10 presented earlier this month, real estate developers have finally got a reason to cheer after Finance Minister Pranab Mukherjee announced various measures today to give a boost to affordable housing projects.
He said today that Section 801B of the Income Tax Act — which allowed 100 per cent deduction of profit earned from building smaller houses of 1,000 sq ft in Delhi and Mumbai and 1,500 sq ft in other places if the project was approved by March 2007 — would be amended; it will now apply to projects approved up to March 2008. Mukherjee also extended an interest subvention of 1 per cent on home loans upto Rs 10 lakh for the first year of loan, provided the cost of the houses does not exceed Rs 20 lakh. The sunset clause for the industrial park scheme has also been extended by a further two years, up to March 31, 2011.
“We welcome the decision of the government to provide a boost to affordable housing by giving incentives to developers as well as buyers. The demand for affordable housing is picking up and the interest subvention of 1 per cent on home loans will make it easier for people to go for their homes”, said Pradeep Jain, chairman, Parsvnath Developers.
Since the economic recession hit Indian markets in 2008-09, the sales of homes has fallen by almost 70 per cent, and now there is a shift towards low-cost or affordable housing. Even though there are no firm estimates of the total of affordable flats on offer, back-of-the-envelope calculations show top developers such as DLF, Unitech, HDIL and others are planning over 55 million sq ft of new launches this financial year, around 90 per cent of their total number of new projects.
However, to bail out the realty sector from its slump, sales need to go up further, as buyers are still vary of taking up home loans.
The industry had asked for various sops before the budget,(including extension of section 801B). However, none of their demands were met when the annual budget was presented on July 6.
The government had withdrawn tax benefits for developers for developing smaller houses in the year 2007.
“The extension of section 801B will help the developers, as a lot of small housing projects were approved during 2007-08. The developers will try to complete these projects within the stipulated four years to avail of the tax benefits”, said, Sunil Malhotra, vice president, finance, Omaxe Ltd.
“The government understands that the developers would be under pressure in the next two years. The extension will help developers to complete their industrial park projects,” said Kaustav Roy, executive director, Cushman & Wakefield.
