Five Reasons To Buy A New House After June 2017
The central government is set to amend the Employees' Provident Fund scheme so as to enable almost 40 million members to withdraw up to 90 per cent of their fund for making down payments while buying homes
If you are scouting for a sub-50 lakh rupees home and you are a first-time buyer, it will make sense to wait for a while to own your brand new home. The same holds true for all those home-buyers who want to own their dream home in the category of 'affordable housing'. After all a slew of incentives announced in the budget for 2017-18 (FY18) will come into effect beginning April 1. Also, the much awaited provisions of the regulation for the real estate sector also kicks in from May 1. Here are some of the points for consideration.
On February 1, 2017, the Union Finance Minister Arun Jaitley announced a number of measures to help the real estate sector. Some of these measures like awarding infrastructure status to the affordable housing segment can be termed as the "biggest" of all recent government decisions in recent years. Why? Because this will bost the construction of lakhs of units of housing very quickly. Coupled with certain incentives announced for the developers, experts term affordable housing to bring in the much needed boost to the otherwise stagnant housing sector. Several private developers are in the process of drawing up their plans in the affordable housing segment across the top 8 cities in India and even beyond. "Beyond June, and for sure near Diwali, the industry expects dozens of announcements of projects falling in the affordable housing segment. These projects will also be governed under the new Real Estate laws and therefore will get completed in a time-bound fashion. It makes sense for any un-decided home buyer to wait for few more months and then invest in a brand-new home rather than negotiate for the best deal in ready-to-move in properties (several of which have been ready and unsused for several months, even years)," says the India head of a leader real estate consultancy service. The move to tax unoccupied houses a year after getting completion certificate was also announced. This is aimed at discouraging speculative investment in housing and encouraging long term investments. It will come into effect after April 1 when National Housing Bank is also expected to refinance individual home loans worth Rs 20,000 crore for buyers and those involved with the disbursing loans for affordable housing projects.
For salaried employees, there is another very important reason to perhaps wait for some more months to own their dream home. The central government is set to amend the Employees' Provident Fund (EPF) scheme so as to enable almost 40 million members to withdraw up to 90 per cent of their fund for making down payments while buying homes. The amendment in the scheme will also allow the Employees' Provident Fund Organisation (EPFO) subscribers to use their EPF accounts for paying equated monthly instalments (EMIs) of home loans. Under the new proposed provision in the EPF scheme, EPFO subscribers would have to form a cooperative society with at least 10 members for availing the facility. "The Government has taken a decision for modification in the Employees' Provident Funds (EPF) Scheme, 1952, to add a new paragraph 68 BD," Bandaru Dattatreya, the labour minister informed the Parliament recently while replying in Rajya Sabha on a query about housing scheme for the EPFO members. The proposed proviso also provides that "monthly instalments for repayments of any outstanding payments or interest may also be paid from the amount standing to the credit of the member, to the Government/housing agency/primary lending agency or banks concerned." As on March, 31, 2016, there were 17.14 crore EPFO members. However, on an average, contributions have been received in respect of only around 3.76 crore members during 2015-16. The withdrawal facility from the Provident Fund (PF) account under this scheme will be available to only those PF members who fulfil the conditions prescribed.
Budget measures also include an easier access to institutional credit. This will help developers reduce their borrowing cost for projects. "Again, many of such projects will come up in next few months, to say the least. Lower project cost for developers will mean lower cost of housing units. It makes sense to wait," says a middle-level employee of a NBFC that provides small-ticket loans to consumers particularly in the affordable housing projects. Another measure announced in budget for the developers will also take some time to kick in. The finance minister announced upt to 100 per cent deduction of profits from tax of an affordable undertaking of carpet area of 30 square metres in four metro cities and up to 60 square metres in other cities for the developers. Then the benefit of greater tax deduction for interest paid on housing loans will also come into effect post April 1, 2017 (start of the new financial year). The move to tax unoccupied houses a year after getting completion certificate would discourage speculative investment in housing and would encourage long term investments, thereby reducing susceptibility to price volatility.
From May 1, the Real Estate (Regulation and Development) Act, 2016 (RERA) will kick in. As a result a number of State governments are working towards adopting a single-window clearance for the developers. A full measure of the impact of RERA will be felt in three to six months, say experts. Developers, as a result are actively looking at lowering the ticket size of apartments by lowering launch prices and/or apartment sizes. The home loan rates are at their lowest (from some of the banks) which can be availed even today if one wants to go for a ready-to-move in home. The holding period of Long Term Capital Gains Tax (LTCG) for land and immovable assets has been relaxed to 2 years. This may lead to greater secondary sales of residential units. Then the recent restrictions on dealing in cash transactions only upto Rs 3 lakhs would help curb the artificial hike in home prices, particularly in the sale of units in the secondary market.
"Things will only get better from here for the real estate sector, and the sector will likely see a turnaround towards the end of the year," says Anshul Jain, MD of Cushman & Wakefield India, one among the largest commercial real estate services firms in the world.
Once the provisions of RERA kick in, efforts are on to put the systems of approvals of residential projects online. For example, in Delhi and Mumbai, work is on to give online approval to developers within 60 days of filing the applications (subject to all conditions and necessary clearances have been obtained). There are enough examples in several cities where houses are lying vacant for months/years as there are no takers. Why? Because of lack of basic infrastructure. According to an estimate over 22,000 houses are lying vacant in Delhi because of lack of drainage/sewage connectivity or absence of byroads/main roads or improper/absence of rain water drainage among a host of reasons. This situation is expected to change across states and will begin reflecting towards the later part of 2017, experts say.
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