Savings from the tax sops in the recent budget could lead to greaterinvestment in bigger homes, say Padma Ramakrishnan and Prachi Bari

It's a gift out of the blue from the finance minister, and home buyers are looking forward to making the most of it by buying bigger flats or second homes.

The Menghani family residing in Dhole Patil Road, comprising three professionals, the senior B G Menghani, his son Hitesh Kumar Menghani an daughter-in-law Soniya Menghani with a combined annual income of Rs 16 lakh were planning to buy a 2BHK house. Thanks to finance minister P Chidambaram's tax sops, the family will end up saving between Rs.80-90,000 a year, and are now looking to buying a 3 or 31/2 BHK at Empress County. Says B G Menghani, "Chidambaram has made things easy for me and given a boost to my idea of buying a bigger house. We will be going in for a home loan, and I don't see any problems in servicing it."
   According to developer Rajesh Choudhary, Director, Prestige Developments, the sa ings will be twice for dual income families and hence e their ability to leverage will be pretty high. It's a gift out of the blue and the extra income will go towards fighting inflation and getting a little extra sq ft, he says. Those who have already been paying higher EMIs due to the hike in interest rates will get a breather in terms of repayment capacity. The fence sitters will have a few lakhs extra to buy a home. Ashish Bhandari, Director, Mindspace Realty, says this increased purchasing power in the hands of the buyer will translate into home purchases.

Akash Deep Jyoti, Head - Infrastructure and Corporate Ratings, Crisil, explains: "The positive spin-offs of this event far outweigh any measure that had reduced input costs for housing." He points out that on an average there will be a saving of Rs 3,500 per person per month which would not only mean a new set of customers eligible for housing loans, but also higher eligibility for existing customers. This will boost overall housing demand across the cities and for various sizes, he adds.
 It's an enormous benefit for the salaried class who can now look to buying their dream home more confidently, point out experts. The increase in the income tax exemption limit to Rs 1,50,000 for men and Rs 1,80,000 for women is a boon for home buyers.

A couple earning about Rs. 8 lakh per annum between them, would, thanks to the tax sops, have extra cash of about Rs. 50-60,000. This would help them borrow an additional Rs. 4-5 lakh. They can now take a loan of about Rs. 40 lakh instead of the earlier limit of Rs 35 lakh. Suddenly that 2 BHK flat does not look distant.

Kumar Gera, MD, Gera Developments and Chairman, Confederation of Real Estate Developers' Associations of India (CREDAI) says though there is nothing specific for the real estate sector, the silver lining is the stimulus given to other sectors and reduction on personal taxation which would enhance disposable incomes and in turn lead to individuals being able to service higher EMIs upon purchasing a house.

Another important provision in the budget has been about how reverse mortgages should be treated by the taxmen. The budget has clarified that reverse mortgages should not be treated either as income or capital gain and hence not be taxed. This would go a great deal towards creating more confidence among senior cit zens planning to take advantage of this product, says R Verma, Executive Director, National Housing Bank.

Analysts believe that this move will go a long way towards popularising the product, which, though launched a over a year ago, has not found enthusiastic takers. They believe that these schemes -- where senior citizens can mortgage their property and either get a lump sum amount worth a certain percentage of the value of their home or choose to get a monthly installment over 15 or 20 years --would now be promoted in a big way by players like banks and housing finance companies.

Developers like Lalit Kumar Jain, Chairman, Kumar Builders and President Promoters and Builders Association of Pune, however are unhappy that the budget had nothing to boost mass housing. If that had happened, then developers would have been ready to go out of the city to build mass housing, says Anuj Bhandari, Director, B U Bhandari Group.

Also with property prices going up and double digit interest rates, the tax exemption on the interest component of home loans remaining the same at Rs 1,50,000 is just not fair, say home buyers. A decent 2 BHK flat is not available below Rs 40 lakh, for which you need to take a loan of at least Rs 30 lakh; this kind of interest exemption is thus inadequate. Commenting on some other real estate and infrastructurerelated provisions of the budget, Akash Deep Jyoti says, "Though the budget did not provide any direct push to infrastructure, its is expected that higher allocations for NHDP and NURM would catalyse infrastructure growth, thereby encouraging greater urbanisation." Supporting this view, Anshuman Magazine, Chairman and Managing Director, CB Richard Ellis, South Asia, says, "The increase in JNNURM allocation from Rs. 5,482 crore in 2007-08 to Rs. 6,866 crore in 2008-09 budget would, if implemented well, bring in ground level reforms like rationalisation of property tax, reduction of stamp duty and other state and municipal level fiscal reforms, among other benefits," he says. Anuj Puri, MD, Jones Lang LaSalle Meghraj, takes cognizance of another interesting provision of the budget and its impact on the real estate sector. He points out that the special focus on education and healthcare will have a positive impact on the inherent value of townships developing in many parts of the country. "The availability of educational and healthcare facilities always adds great value to such projects, and location in general," he says. The five-year tax holiday that has been granted to Tier II/III city-based hospitals and 2/3/4 star hotels in UNESCO-specified heritage districts will give a boost to the economy and real estate sector in these towns, analysts believe.