Good News! Property to Become Affordable For New Home Buyers

Bangalore: The current budget has brought good news for first time home buyers. Finance Minister P Chidambaram has increased the limit for tax deduction by 1 lakh for new home buyers.

However, there is a catch, when buying property, the cost of the property should not exceed 40 lakh. Which means, maximum home buyers in metros will not fit in the eligibility list to get additional benefit.

"This would mostly be helpful for people who want to buy a house in smaller cities or distant suburbs where the ticket size is lower," said Niranjan Hiranandani, Chairman of the Hiranandani Group.

This current budget has also provided 1 percent TDS on immovable properties that sold for more than 50 lakh.

"A person would now need a TAN (Tax Deduction Account Number) to deduct tax on behalf of the central government. So once a buyer gets a TAN, only then can he purchase an immovable property. He is paying only 99 percent of the value to the seller and the balance 1 percent to the government," said Pranay Vakil, chairman, Praron Consultancy, reports Economic Times.

Chidambaram stated that "Homes and flats with a carpet area of 2,000 sq ft or more or of a value of 1 crore or more are high-end constructions, where the component of 'service' is greater. Hence, I propose to reduce the rate of abatement for this class of buildings from 75 per cent to 70 per cent," reports PTI.

"Effectively, this translates into an increase in service tax outflow, which means that luxury housing will now become even more expensive," said Anuj Puri, chairman & country head, Jones Lang LaSalle India.