The government on Monday extended a helping hand to the realty sector – one of the worst hit by the economic slowdown – by making loans more affordable to middle class homebuyers.
Finance Minister Pranab Mukherjee announced a 1 per cent interest subsidy on loans up to Rs 10 lakh taken for houses that do not cost more than Rs 20 lakh.
The move, which is estimated to cost the government an additional Rs 1,000 crore this year, came with several other budgetary concessions the finance minister offered while replying to the Finance Bill in the Lok Sabha.
Other measures included making education loans more cost effective, tax breaks for food processing and poultry industries and such infrastructure-related fiscal concessions that will aid the recovery of the broader economy.
Besides the interest subsidy, the finance minister also extended the deadline for completion of certain tax-exempt reality projects by one year to March 2012. These projects must have been approved by March 2008, instead of an earlier timeline of March 2007.
The move is expected to improve profit margins and cash position of realty companies, and thus help them not only expedite work but also offer better bargains.
“I expect developers to pass on the benefit of tax holiday to the home buyers by appropriately reducing prices,” Mukherjee said.
Realty companies, however, said the measures fell short of expectations.
“The tax holiday has been extended only for projects that had been approved more than a year ago. The benefits would have much higher if projects till March 2010 were made eligible,” said Kumar Gera, chairman of Confederation of Real Estate Developers Association of India, or CREDAI.