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Budget 2017 - Boost for housing demand on the cards

January 2017 | Back to all Real Estate Articles

This Budget is expected to leave more money in the hands of consumers with higher tax benefits. The push for budget homes, coupled with the expected tax breaks, is good news for homebuyers.

The Union Budget for the next financial year is scheduled to be tabled in the Parliament by the Finance Minister on February 1. This time, the Budget is expected to be consumer-friendly, especially in the light of the recent demonetisation exercise conducted by the government and the related hardships faced by the people. In addition, the government will now have to focus on growth, on pushing demand and the overall economy.

With the introduction of cashless modes, push towards digital payments and electronic transfers, there has been an increase in revenue collections of the government. In addition, the Income Declaration Scheme 2016 of the government is expected to add a significant amount of tax revenues to the government's coffers. At a tax rate of 45 percent, almost Rs 35,000 crores is expected to be collected as tax.

Here's what's on the cards:

Income tax

It is strongly believed that the government may reduce the income tax rates. Presently, the rates are 10 percent, 20 percent and 30 percent for the different income slabs. It is expected that the government may increase the tax slabs and/or decrease the income tax rates.

There may be some upward revision in the income tax slabs too. Also, it is expected that the basic exemption limit will be raised from the current Rs 2.50 lakhs per annum to at least Rs 3 lakhs. All this will provide some relief to taxpayers.

HRA, allowances

The deduction limits against HRA, medical allowance etc were set years ago and are not in sync with the current reality. It is expected that the government will now take a holistic view and revisit these limits, and go in for a significant enhancement of the limits. An increase in these limits will enable individuals to save more on tax. It will leave more money in their hands.

Standard deduction

Another expectation is the reintroduction of the standard deduction. This was available to individuals till a few years ago. It will cover the general expenses incurred by all for which no special income tax treatment is provided under the Income Tax Act.

This was a generic deduction available to all, without the need to furnish any proof of expenditures. Reintroduction of this deduction will enable one to save a substantial amount of tax.

All these benefits will leave more money in the pockets of individuals, which will result in increased purchasing power. As a result, there will be a spike in demand which will lead to an increase in production. This in turn will revive economic growth, which has witnessed some deceleration during the past few months.

Push for budget housing

There is a strong push for the budget housing schemes of the government. The cumulative impact of the tax benefits and the push for budget housing will be felt on the demand for housing in this segment. The increased disposable income in the hands of individuals can be used to fund a house purchase. It will enable higher payment of EMIs on a home loan.


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