Home owners with mortgages of up to Rs10 lakh are getting another year in which they will get a 1% interest subvention, a scheme that was announced in the previous budget but hasn’t taken off yet.
Under this incentive, a buyer gets a 1 percentage point reduction in the interest rate for the first year of the loan on houses costing not more than Rs20 lakh. Finance minister Pranab Mukherjee has provided Rs700 crore for this scheme in 2010-11.
More than the subvention, what may encourage prospective home buyers is the fact that the finance minister’s proposals will leave more disposable income in their hands after the changes in income-tax slabs, driving real estate demand.
The new income-tax slabs could result in savings of up to Rs50,000 for those earning more than Rs3 lakh, Reuters reported.
R.R. Nair, director and chief executive, LIC Housing Finance Ltd, said while the subsidy extension was not of much significance, the raised personal tax slabs would put more money in the hands of potential buyers and would be the demand driver for home sales.
Those looking to buy the “affordable” homes being offered by builders such as Unitech Ltd may also be encouraged by the Budget giving firms another year for pending real estate projects launched in 2006-07 to be completed for claiming tax deduction on profit.
Renu Sud Karnad, managing director, Housing Development and Finance Corp. Ltd, the country’s largest mortgage lender, says this would be “beneficial to developers focusing on the affordable housing segment”.
The Budget has also allocated Rs1,270 crore for the Rajiv Awas Yojana, under which slum pockets across the country will be redeveloped, sharply higher than the Rs150 crore earmarked in the budget for 2009-10.