Budget 2010 No surprises - By: Raja Kaushar

Tax relief and interest rate subsidy will accelerate the growth of affordable housing
Vandana Ramnani

While the real estate sector has welcomed the i budget as "growth-oriented", some realty experts have termed it a "mixed bag" which has its "positives and negatives."
HT Estates looks at how the budget proposals will i affect the common man and the developer.
i Direct tax sops Finance Minister Pranab Mukherjee has proposed that while there would be no tax on incomes of up to Rs 1.6 lakh, a tax of 10 per cent will be levied on incomes of up to i Rs 5 lakh, 20 per cent on up i to Rs 8 lakh and 30 per cent on earnings above that level.
The revision in income tax slabs will increase the takehome salary of an individual with an income of Rs 10 lakh per annum by Rs 50,000. i This, in turn, will increase his eligibility for a housing loan by approximately Rs 5 lakh.
"This is a positive, growthoriented budget -the growth of the economy equals growth for the real estate sector. The positive revision in personal income tax rates will put more money in the pockets of the middle class, thereby increasing the purchasing power and improving the sentiment of home buyers," says Anuj Puri, chairman and country head, Jones Lang LaSalle Meghraj.
"No unpleasant surprises is good news" and this is typically true of this budget, the thrust of which is on managing growth while controlling fiscal deficit, says Pranab Datta, vice chairman and MD, Knight Frank India.
Interest rate subvention The scheme of one per cent interest subvention on housing loans up to Rs 10 lakh, where the cost of the house does not exceed Rs 20 lakh, has been extended up to March 2011.
This interest rate subvention will continue to benefit individuals borrowing up to Rs 10 lakh for residential properties up to Rs 20 lakh for one more year and will boost affordable housing.
"We welcome the extension of interest subvention scheme of one per cent on all individual housing loans up to Rs 10 lakh for units that cost up to Rs 20 lakh till March 30, 2011," says Kamal Taneja, managing director, TDI, a real estate company.
"This will prompt developers to give more importance to projects that will cost up to Rs 20 lakh," says Pradeep Jain, chairman, Parsvnath Developers and president, CREDAI NCR, a real estate industry body.
The move will help maintain the recovery of the affordable homes segment, adds Sachin Sandhir of Royal Institution of Chartered Surveyors (RICS).
Scope of service tax expanded The Finance Minister has expanded the scope of service tax on the real estate sector. The builder would now be paying (and thereby charging the buyer) a service tax of 10.3 per cent on the `activity of construction' (though not on the land cost). As a result, the buyers, across the board, will be paying a higher price for properties under construction. As a result, all under construction projects would face an increase in prices.
Also, the prices of completed properties could see a price rise (in the short term) as demand for them would jump, says Priyankar Bhikshu, associate director -consulting and research, DTZ.
While the intention is to encourage quicker completion of properties and discourage speculation in under-construction projects, the manner in which the market responds to this new service tax would have an impact on business planning of developers in the long run, he adds.
Says Kumar Gera, president of Confederation of Real Estate Developers' Associations of India (CREDAI), "We're disturbed about this service tax on residential bookings of under construction properties.
This is disturbing because this will lead to increase in prices of apartments at a time when everybody is talking about affordable housing. This would lead to a cost push to the consumer and translate into flat prices going up by around 4 per cent."
Concurs Sanjeev Srivastav, chairman and managing director, Assotech group, "It will put a load on the customer and have an impact on costs and sales. It should be reconsidered."
Courtesy:HT Estates dt:06-March-2010
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