Budget 2017 : New hope for Real Estate Sector

The Finance Minister in his Budget 2017-18 speech has given one of the much needed thrust to the Indian real estate sector. The minister announced that the ?Affordable Housing? will be given ?Infrastructure? status, which is likely to result in increased participation from private player. Home buyers, developers and investors, all stand to benefit from it.

Few major changes in this budget:

Affordable housing gets a boost

A strong push has been given to the affordable housing sector by giving it the status of ?infrastructure?. This will attract more investments and funding to the sector and may result in bringing down the cost of capital for developers.

Redefinition of long term

The reduction of holding period?from 3 years to 2 years?to qualify for a long-term capital gains (LTCG) status, will benefit investors in real estate.

Currently, the short-term capital gain (STCG) from property investments are taxed at the slab rate which is applicable to the individual. On the other hand, LTCG is taxed at 20%?this excludes cess but comes with the big advantage of indexation.

Loan-bought rented properties

Presently, a home loan borrower can claim tax deductions under section 24(b) against interest paid on home loan. The current limit allows a deduction of up to Rs 2 lakh for payment of interest in case of a self-occupied house. If the house is let-out, then the entire interest paid on home loan can be claimed as a deduction.

To remove this anomaly, the tax deduction due to interest paid on rented-out properties, which are bought on loan, will be restricted to Rs 2 lakh.

However, the additional interest that is above Rs 2 lakh paid during the year, can now be set-off in next eight assessment years.