Jaitley’s Unspoken Message To Homebuyers Is Loud And Clear

By the look of it, the Budget 2018-19 did not offer much to India’s middle-class homebuyers who drive the demand for property in the country. The government push towards affordable housing largely serves the lower-income groups and the economically weaker sections. The talk about circle rate rationalisation is also meant for high-value transactions in premium areas of cities such as Delhi and Mumbai. To cut a long story short, the middle-class Indian, who the finance minister referred to as the salaried class in his Budget Speech, did not hear anything in the Budget that would have concerned him, and felt deeply disappointed, except, of course, a pat on the back.

“There is a general perception in the society that individual business persons have better income as compared to salaried class. However, income tax data analysis suggests that major portion of personal income-tax collection comes from the salaried class,” the FM said, and made an effort to provide the honest taxpayer some relief in the form of offering a standard deduction of Rs 40,000 “in lieu of the present exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses”.

All other hopes of tinkering in the tax slabs were already dashed when Jaitley announced that his government had made many positive changes in the personal income-tax rate applicable to individuals in the last three years, and, therefore, he did not propose to make any further change in the structure of the income tax rates for individuals.

Despite not doing much for the benefit of the honest-salaried class, Finance Minister Arun Jaitley may have still brought several changes as far as the property market is concerned.

How so?

Despite interest rates being at an all-time low, and despite a substantial correction in property rates across major cities of the country and despite the launch of the real estate Act, buyers so far do not look keen to invest. Those who have been postponing their plans to buy homes widely expected the Budget 2018-19 to offer further relief.

Others have also been expecting the effective rate of the Goods and Services Tax (GST) to be brought down to encouraging home-buying. Jaitley made no such commitment in his Budget Speech. The current levy of 12 per cent will be maintained, unless you are buying a home under the Credit-Linked Subsidy Scheme under the Pradhan Mantra Awas Yojana (eight per cent).

Also, Jaitley recently indicated that states were currently not be in favour of letting go and allowing the real estate sector to be brought under the ambit of the new tax regime. Once that happens, buying a ready-to-move-in property might actually become costlier.

In its latest monetary policy review, the Reserve Bank of India has also decided to keep the interest rates unchanged, and, if industry experts are to be believed, if there is any movement in rates from hereon, it would definitely be upwards.  If a woman borrower applies for a home loan from, say, public lender State bank of India at present, the effective interest rate is 8.30 per annum, and she would not have to pay the processing free. Even a slight change in rates and approach, which is quite borrower-friendly now, here would cost you dearly.

Jaitley may not have spoken much to buyers in his about two-hour Speech or after Budget comments, but, the message is loud and clear ─ no new largesse is coming your way. You may like to consider coming into action, leaving that fence behind.