Home buyers in small cities to gain from budget sops

The Union Finance Minister has offered a series of incentives which will rejoice the first time home buying individuals in smaller cities and towns. However, the incentives provision is short-term in nature. All purchases have to be made within the FY14 starting April 1.

Experts say the Rs 40 lakh value includes transaction taxes such as stamp duty and registration. Thus, if you purchase a flat for this amount, you have to pay 20 per cent or Rs 8 lakh upfront.

For the rest (Rs 32 lakh), deductions can be utilised for loan amounts up to Rs 25 lakh. Given the cap of Rs 40 lakh on the value of property, experts feel it would help people in the periphery of cities and in Tier-II and Tier-III locations. Says Vipul Patel, Director, Home Loan Advisors, This will incentivise builders to construct houses below Rs 40 lakh in smaller towns, encourage first-time buyers to take the additional Rs 1 lakh deduction and could act as a cap on housing prices in these centres.

Given that interest rates on housing loans below Rs 25 lakh are lower is an added incentive for the prospective home buyer, adds Patel. Harsh Roongta, CEO, Apnapaisa, says the provisions are beneficial for the first-time buyer (ineligible if you have inherited a home) and for loans in the range of Rs 15-25 lakh.

Moreover, unlike existing provisions, the new deductions seem to allow even properties under construction. However, it is not clear whether one would be able to utilise the benefits in the second year (given the uncertainty), though there is a provision for that.