While most of the major Indian cities have seen a decline or marginal increase in the prices of residential properties in recent years, Pune has registered a hike of over 100 per cent. It is one of the three cities to see more than 100 per cent rise in the segment since 2007, says the Economic Survey 2012-13. According to the ES, tabled by Finance Minister P Chidambaram in Parliament on Wednesday, Pune has witnessed a 101.1 per cent increase in the prices of residential properties in the July-September 2012 quarter as compared to the prices in 2007. Other cities that have registered steep increase are Bhopal (106.1 per cent) and Chennai, with the latter seeing a 212 per cent hike — highest in the country. On the contrary, prices in Hyderabad, Bangalore and Jaipur have seen a decline of 15.7, 14.7 and 1.7 per cent, respectively. Other cities such as Patna (37 per cent), Delhi (78.5 per cent) Ahmedabad (79.7), Kolkata (90.9 per cent) and Mumbai (98) have seen a marginal to moderate increase. The survey has attributed the spiraling property prices in the three cities to determinants such as prices of land, low FSIs and other factors. "Rapid increase in land prices, absence of a long-term funding and lending market at fixed rates, limited developer finance, the Urban Land Ceiling Regulations Act (ULCRA) continuing in some states, existing lower floor area ratio in cities, high stamp duties and difficulties in land acquisition are some other issues, that need to be addressed," observed the ES. "As per the National Housing Bank Residex index for the July-September 2012 quarter, compared to April-June 2012 (covering 20 cities, with 2007 as base year), there is a general decline in prices of residential properties in some smaller towns, while the increase in other cities is mostly marginal," it added.. Rohit Gera, managing director of Gera Developments, credits inflation and increase in the taxes to be paid to the civic bodies for the soaring prices of properties in the city. "The hike that is being seen in the Economic Survey data is largely due to inflation, increase in the labour cost and land prices. Also, the money that is to be paid to the municipal corporation in taxes has also increased by 200 to 300 per cent. Because of all these factors, according to our estimates, the prices of residential properties have increased by about 17 per cent in the last one year," said Gera. Besides this, he added, "Pune market is not as volatile as other markets. Some years ago, when the markets had crashed and many cities registered a decline of 35 to 40 per cent, the dip in Pune was only about 20 to 25 per cent. Pune has been historically stable when it comes to property prices." Interest deduction on home loans upto Rs 25 lakh not of use for Pune The finance minister's announcement to raise interest deduction limit by Rs 1 lakh on home loans up to Rs 25 lakh to promote the housing sector has been widely welcomed, but real estate experts in the city are saying the proposal is of no consequence as far as Pune is concerned owing to higher prices of residential properties. In his budget speech, Finance Minister P Chidambaram said: "A person taking a loan for his first home from a bank or a housing finance corporation upto Rs 25,00,000 during the period April 1, 2013 to March 3, 2014 will be entitled to an additional deduction of interest of upto Rs 1,00,000." Depending on the tax slab, one will save an additional Rs 10,000 (10% slab), Rs 20,000 (20% slab) and Rs 30,000 (30% slab) due to the additional Rs 1 lakh deduction on interest paid for new home loans up to Rs 25 lakh. It does not include the tax cess. According to Ravi Karandikar, a real estate expert, the provision will boost the construction industry in Pune district as a whole but not in city areas. "For Pune city, property prices are much higher than the Rs 25-lakh limit. But the announcement would certainly boost development in areas such as Talegaon, Shirwal, Ranjangaon, Shirur and Pirangut. It will mainly boost the construction industry and provide jobs to thousands of people," he said.
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