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19th of August 2018


Policy changes help first-time homebuyers

Measures like the government’s extended subsidy to bigger homes under the government schemes and implementation of Real Estate Regulation & Development Act (RERA) and Goods & Service Tax (GST) are expected to improve transparency and build in confidence among homebuyers. Besides, with residnetial market seeing a price correction of up to 15-20%, this is a good time for homebuyers, especially first-time buyers.

Benefits from RERA

RERA is expected to bring in price corrections of home rates in areas with a large stock of completed projects, especially in the premium and luxury segment. RERA is also expected to compel a time correction and ensure that consumers get what they want, within the timeline promised by builders.

Post RERA, builders and real estate companies are getting more serious about implementing consumer protection initiatives than ever before. Hence, we see an uptick in RERA-projects this year. Some states like Delhi, Jharkhand, Rajasthan and Haryana have begun to offer partial rebates on stamp duty to women.

Similarly, state governments are also implementing policy framework to boost affordable housing -- Rajasthan, Gujarat, and Uttar Pradesh were among the first ones to come up with a model framework for affordable housing.

Opportunity to invest in affordable housing

Measures like accordance of infrastructure status to affordable housing and various tax sops being offered to both developers and buyers are expected to boost the number of housing projects in this segment. The new focus and impetus on low-cost and affordable housing projects will translate into home buyers being able to choose and invest in properties that best suit their pockets.

Recently, the government cut GST rates from 12% to 8% for first-time home buyers for houses purchased using the credit-linked subsidy scheme (CLSS) under Pradhan Mantri Awas Yojna. The rebate on GST rate is applicable to first-time home buyers with a maximum annual family income of Rs 18 lakh. This means a homebuyer with a family income of up to Rs 18 lakh per annum will be eligible for a benefit of up to Rs 2.7 lakh under CLSS. However, homebuyers who don’t fall under CLSS would have to pay a GST of12%.

The GST rebate will also be applicable to low-cost housing projects with infrastructure status, where the maximum carpet area is 646 square feet. The condition of “first-time home buyer” is not applicable here.

In May, the Housing and Urban Affairs Ministry also enhanced the carpet area of houses eligible for subsidy under CLSS for middle income group (MIG) to 160 square meters for MIG-I from 120 square meters and to 200 square meters for MIG-II from 150 square meters.

The government will provide a 4% interest subsidy for Rs 9 lakh in the case of MIG-I home buyers (annual income of Rs 6-12 lakh) and 3% interest subsidy for Rs 12 lakh in the case of MIG-II home buyers (annual income of Rs 12 lakh to 18 lakh).

The writer is ED & CEO, Reliance Home Finance

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