Thursday, July 30, 2009

Banks to offer subsidy on home loans, says FM. Assetventures

minister Pranab Mukherjee said that the interest rate subsidy for mid-segment housing would be routed to customers through
commercial banks and housing companies registered with the National Housing Bank. He said to further provide stimulus to the housing sector, it will be allowed a tax holiday in respect of profits derived from projects approved between April 1, 2007 and March 31, 2008, if such projects are completed on or before March 31, 2012.

‘‘I expect the developers to pass on the benefit of tax holiday to home buyers by appropriately reducing their prices. I am sure that both the expenditure and tax-foregone initiatives would provide relief to a large segment of prospective home owners and help revive the real estate sector,’’ he added.

The interest subsidy is aimed at mid-segment housing loan borrowers from the lower middle to middle-income groups. Even on Monday, Congress MP from Mumbai (North) Sanjay Nirupam, while speaking on the finance bill, said 42.4% of Maharashtra’s population was urbanized and trends pointed to increasing migration to cities. With home loan rates climbing steeply, there was a case for providing relief to borrowers. Providing an interest subsidy and a targeted tax break also answers in part the demand that the becalmed real estate sector needs a leg up.

The government’s message to the real estate developers is to lower prices and make housing more affordable for the aam aadmi.

The housing loan subsidy came with a slew of other concessions such as exempting road repairs and maintenance from the ambit of service tax while extending the sunset clause for tax holidays for industrial parks by a further two years up to March 2011 to boost growth in infrastructure. The FM clarified that service tax on new services and any alteration in the existing services as announced in the Budget would be effective from September 1, 2009.

‘‘It’s a welcome step from the government. The decision is sure to improve loan eligibility and affordability of a large section of the Indian middle class. It will also lead to increased activity with regard to real estate in the affordable housing segment which in turn will create employment,’’ said Renu Sud Karnad, Joint MD, HDFC Ltd.

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