Raja Housing Info - Ready to Move House Gets Tax Benefits

When you don’t have much choice, shopping becomes simple. This implies while purchasing a house as well. If you’re planning to purchase a house, the important decision you have to take is whether to go for a under construction one or ready to move house.

PRICE

A ready to move house will cost more, if property type, location, size and neighborhood are same. The reason is transparent. For the possession you don’t have to wait and also can save the rent. A cost of under construction house will be less, but if you opt for that you have to keep paying the interest on home loan and also rent on your present house.

Compare two properties, one ready to occupy and other to be ready by next three years but costing 25 percent less. The annual outflow, assumptive 80 percent house worth as loan, are going to be virtually same within the initial 3 years if down-payment amounts are constant. The purpose is that the tax breaks that you are going to be eligible for within the total purchase and zero rent outgo.

TAX

One must purchase their first house in life as soon as possible to gain from tax deductions and to save rent. Claiming deductions is not so easy for an under construction house, says experts.

This is how related tax laws work. The principal amount paid up to Rs 1 lakh is deducted from income under Section 80C of the Income Tax Act. The interest paid for a loan is entitled for deductions up to Rs 1.5 lakh on the first house under Section 24(b) of the IT Act (the whole interest payment can be deducted for the second home from the income that is earned from it).

For the properties which are ready these deductions are permitted. An under construction property is not eligible for Rs 1 lakh deductions available for principle payments. When the property is under construction the interest paid can be deducted in five equal installments.

A huge number of buyers are not eligible for the tax deduction of Rs 1.5 lakh on interest payment, with projects slows a standard rather than an exception.

Previous financial year’s interest paid will also become qualified for deductions. Pre- construction interest of one-fifth can be added to the interest paid during the year, and over the next four financial years the rest will be included.

However, when the loan is huge, deductions on pre-construction interest does not make much sense. This is because principal payments and interest of present year will cut off the tax deduction limit. If you’re in 30 percent tax bracket you can save Rs 45,000.

SERVICE TAX

If a developer is selling a property in a group housing project before it is ready for possession, a 12.36 percent of service tax is charged on a part of price. There is no such tax if the carpet area of the property is up to 60 sq.ft.

For the property which is not exceeding 2,000 sq.ft in area or if the properties worth is of Rs 1 crore, than only on 25% of the price the service tax is applicable. The effective service tax is 3.09%.

The service tax is calculated on 30 percent of the cost, for the high-end properties, which means 3.71 percent is the effective rate. If the property is ready to occupy than it’s not necessary to pay this tax.

Raja aristos news - Real Estate Growth to increase by Second-half

Post general election; cuts in interest rates; and corporate expenses are likely to enhance the real estate growth.

Real estate veterans are sure about their anticipation in the growth of the real estate sector in the second half of 2014, after the general election, which may bring transparency in the new government and attract more international and domestic investments.

The real estate sector failed to see the anticipated growth in the year 2013 as all asset segments like residential, office and retail properties witnessed a sturdy drop in absorption sparing some cities like Bangalore.

Mr. Anuj Puri, Chairman and Country Head of Realty Consultant Jones Lang LaSalle India (JLL) says, the year 2013 didn’t turned to be so good for the Indian economy because of the deprived macroeconomic situations, sluggish income growth, continued failing in the rupee, increased inflation and high interest rates made the consumers to diverge from spending.

While stepping into the New Year – 2014, let us look back and take a glance of things that was confronted by the real estate sector in 2013:

Residential Segment
The residential segment went down in the first three quarters of 2013 with the sluggish absorption of residential units in most of the cities like Delhi-NCR, Mumbai, and Pune.

A report by Jones Lang LaSalle India (JLL) shows that during the first three quarters of 2013, the weighted average prices of homes in pan India increased by 10 per cent over year-on-year (y-o-y).  The growth in this segment was seen in the peripheral regions and emerging locations, as against the city sub-markets and the rental values increased by 8 per cent in this period.

Mr. Puri also told ‘it is anticipated that the end-users and buyers optimism will remain down in the first two quarters of 2014 due to qualms of general elections and macro-conditions’.  But, the undecided investors are likely come into form post elections and the piled up inventories will be reduced with the increase in absorption of residential units that will raise residential prices by 10-12 per cent in 2014.

About 45 per cent of under construction properties that are vacant in the Mumbai market shows the pressure in the real estate sector, says a recent report of Knight Frank a UK-based firm.

Mr. Sunil Rohokale, Managing Director of ASK Group and an investment manager also stated that during the first half of 2014 interest rates will be high and will drop in the second half, which will improve the sales and absorption.

Mr. Shishir Baijal, Chairman and Managing Director of Knight Frank, India also said that in the beginning of the second half of 2014 the sales volume and launches in residential to get a hold and the prices may see an upward pressure. 

Office Segment
During 2013, the office realty segment lagged the most, as the end-users delayed in rental activity owing to the largely slowdown and ambiguity.

The office segment is driven more by economic grounds, hence the growth in this segment is likely to take place with a quarter lag.

The office space absorption in the major seven cities of India fell by 14 per cent on q-o-q analysis in Q3 of 2013 that accounted to 6 million sq. ft. against the 7 million sq. ft. of Q2 of 2013, says a report released by CBRE a US based firm titled India Office Market View Q3 2013.

Rajeev Talwar - Executive Director at DLF, the country’s largest developer stated as the commercial real estate will grow only when the individual and corporate earnings rises.  He also added that to see growth in office segment many banks should be allowed to support the sector.

 
It is also anticipated that the vacancy rates in office properties will raise from 18.2 per cent (2013) to 19.2 per cent (2014) as the supply is increasing and the absorption is restrained and with government allowing tax relief for real estate investment trusts, commercial sector will grow, says a report of JLL.

Retail Segment
It is anticipated that the entry of multi-brand retailers will boost the retail sector in 2014.

According to a study by global consultant Cushman & Wakefield (C&W), in 2013 the retail segment observed a 39 per cent rise in mall spaces, though18 malls were delayed by the developers, said

C&W further added that the total vacancy in malls in this segment has reduced by 2 per cent due to the improved rental activities in the newly launched malls that began with a high proportion in possession and the average occupancy of new mall space in 2013 was over 94 per cent.