The new government swept into office last May in a wave of hope and optimism. The budget that it presented within two months off assuming office was a placeholder, which paves the way for a full-fledged budget later this month.
This budget is very important and an eagerly anticipated one. It is an opportunity for the government to lay out its economic vision for the growth and development of the country.
I expect the budget to be formulated along the following four objectives, which the previous budget touched upon.
• Road map for fiscal prudence
• Tax and financial sector reform
• Commitment to the social/rural sector
• Creation of housing and infrastructure
A few steps can be taken for housing finance companies which will lower the cost of home ownership and make it more accessible.
• The housing finance industry should be given infrastructure status. This would then open up several new avenues of long-term funds. HFIs can issue infrastructure bonds which qualify for tax benefits. Further, they can raise funds in the overseas markets through the External Commercial Borrowing (ECB) route. Funds raised in these ways will be cheaper, even after factoring the cost of hedging, thus leading to lower lending rates.
• Opening the repo/reverse repo window for HFIs along the lines of Banks would help HFIs manage their short-term liquidity more optimally by borrowing from/lending to the RBI.
• The government could hasten the development of the nascent low-cost housing industry and specific satellite townships by providing tax incentives. For instance, rental incomes in these properties could be tax free for a specified period of time.
• The limit for deduction of interest and principal paid on home loans for self- occupied properties can be revised from the current Rs 2 lakh and Rs 1 lakh respectively, in keeping with the current prices of property.
• Stamp duty is a large component of the cost of acquiring a house, going up to 16 percent in some states. This could do with some reduction. Further, the cascading effect of multiple sales (plot owner to developer to the final purchaser) leads to multiple incidences of stamp duty paid, which adds to the cost of property for the final buyer. There should be a mechanism of ensuring that the stamp duty paid by the developer for acquisition of the property is deducted from that paid by the final purchasers.
(The author is president, Edelweiss Housing Finance Limited)
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Updated Date: Feb 24, 2015 12:42:40 IST