Business
Union Budget 2022: Tax rebates in Budget for realty vital for salaried class
Currently, one-third of India’s population reside in cities and it is estimated to go up to 50 per cent by 2030. There is a steady rise in the number of households with a shift towards nuclear families and increased urbanisation.
The 66 per cent young population – below 35 years of age, are emerging as young millennial borrowers of home-loans. It is also true that home-loans market is driven by young borrowers within the age group of 26-35 years – about 25 per cent and also by people in the age group of 36-45 years – about 28 per cent. These are all active home-loan audience and jointly account for 53 per cent of annual originations.
The average ticket size of a home-loan of young borrowers has continued to increase over the last 5 years, with a CAGR of 6.2 per cent. The ticket size continues to increase more for women than men. The cumulative active home-loan base of these borrowers has seen continuous growth over the last 3 years at a CAGR of 3.5 per cent.
These young borrowers have been the reason for change in the home-loan market.
Within the affordable segment, volume growth in home-loans of Rs 15-35 lakh, over the last 4-5 years, indicate shifting preferences of buyers towards higher ticket sizes. Rural Housing demand for mid-range and higher ticket sizes has continued to increase over the last 5 years too. Share of annual originations (volume) of Rs 35-75 lakh ticket size has increased by 4 per cent in the last 5 years. Share of annual originations of Rs 75 lakh plus ticket size has increased from 0.37 per cent to 0.87 per cent in the last 5 years.
Share of annual originations of Rs 15 lakh ticket size has declined over the last 5 years, largely due to falling demand for very small ticket size segment of Rs 2 lakh.
The dearth of disposable income has been a deterrent factor for salaried class towards taking home-loan and buying real-estate. Since the input cost in real-estate has increased the rates, the salaried class is left with no other option but to approach for home-loans from financial institutions. Interestingly, the tenure of repayment of home-loan is fluctuating between 11-30 years.
There is also a deterrent factor for salaried class in home-loans and EMIs. The EMIs are no more supportive since the financial institutions first draw larger part of interest in the EMIs and principal component is kept less in more than first 50 per cent of the EMIs. As the EMIs near completion, the interest component becomes negligible and principal component is much higher.
Even if the buyer has the provision of pre-payment of home-loan, he ends up paying the larger portion of principal amount rather than saving on the interest. Further, the financial institutions also levy heavy fees on pre-closure of loans. In case the buyer opts for higher tenure for loan repayment, it then makes it difficult for the buyer to invest in second property.
One question that has been asked frequently is – “If the principal and interest amount are predefined, why the EMIs can’t have equal amount throughout the tenure.”
Coming to tax benefit, repayment of principal amount in a home-loan qualifies for deduction under section 80C, which has an upper limit of Rs 1.50 lakh per annum. Since the same section – 80C, accounts a number of other investments including PF, PPF and life insurance policies etc, it becomes impossible for a buyer to take advantage of any benefit out of this section.
Buyers are looking forward to increase in this limit in Union Budget-2022 since this limit has not been increased in last many years.
On the tax benefit for interest payment, since under section 20(b) of the Income Tax Act, there is a cap of Rs 2 lakh per annum on the interest part of the home-loan, home-loans being larger in size, the buyers are unable to take much benefit of the same too. To extend tax benefit to the buyers the government has also added few sub-sections 80EE, 80EEA under the Income Tax Act but the volume of loan is not allowing buyers to gain desired additional benefits out of these sub-sections.
What perhaps needed in the Union Budget 2022 is to bring dynamic changes in the income-tax slabs and increase the rebates under section 80C, 80EE, 80EEA and 24(b) of the Income Tax Act.
One of the greatest philanthropists Andrew Carnegie said – “Ninety percent of all millionaires become so through owning real-estate.” Andrew Carnegie is one of the five people who built America, the other four being Cornelius Vanderbilt, John D. Rockefeller, J.P. Morgan, and Henry Ford. Harv Eker, an author and businessman, known for his theories on wealth and motivation said – “Don’t wait to buy ‘real-estate’, buy real-estate and wait”. These two statements said all about owning real-estate and what it could mean to a buyer.
Globally, investment in real-estate is directly related to the future of a buyer and also growth of the economy, and so be in India.
Fund manager and Chief Dealer at Axis Mutual Fund, Viresh Joshi, who was sacked last fortnight, has served a legal notice to the company challenging what he terms as his illegal termination.
Joshi was first suspended and later relieved of his charge on May 18, as per a statement issued by the AMF on May 19, for his purported role against allegations of ‘front-running’ (or, tailgating) at the company which conducted an internal probe into the matter.
He has hired leading law firm, Mansukhlal Hiralal & Co. to challenge his termination order.
Confirming the development, lawyer Chirag M. Shah told IANS: “We are in communication with Axis Mutual Fund on behalf of our client Viresh Joshi and have duly replied to the unlawful termination notice.”
Shah added that AMF terminated Joshi unceremoniously on unsubstantiated charges of alleged ‘front-running’ and he has sent a notice to the company against the unlawful termination.
The AMF further stated that it had been conducting a suo moto internal investigation into the issue since February 2022 using a reputed external advisor to assist with the ongoing probe.
“Further to our investigation, his conduct and following the decision to suspend him, the employment of Mr. Viresh Joshi has been terminated with effect from May 18, 2022,” said the company.
Bengaluru-based subsidiary of Jio Platforms, SankhyaSutra Labs, which makes high-fidelity multi-physics and aerodynamics simulation software, on Friday showcased its products and solutions at the ‘Drone Festival of India 2022’.
According to the company, achieving accurate simulation of turbulent flows often required in aerospace and defence designing is a challenging task due to the involvement of multiple scales of swirling motions, also known as vortices.
SankhyaSutra Labs said it develops next-generation high-fidelity CFD tools that do not use approximate turbulence models.
“When we speak about self-reliance in defence, we often tend to focus on the ability to manufacture various hardware components indigenously,” Dr Sunil Sherlekar, CEO at SankhyaSutra Labs, said in a statement.
“This journey towards self-reliance would be incomplete without indigenous design tools, which are the key enablers of this journey. At SankhyaSutra, we are developing deep technology for India and the world,” he added.
Incubated in 2015, SankhyaSutra Labs has its R&D centre in Bengaluru with target customers across the globe.
The company has planned a major product launch in October this year.
“Accurate and reliable simulations can potentially reduce the need for expensive and time-consuming experiments, such as wind tunnel experiments, which are used in the designing of aircrafts,” said Dr Vinay Kariwala, VP Business Development at SankhyaSutra Labs.
Reliance Industries Ltd had acquired an 83 per cent stake in SankhyaSutra Labs in 2019, with an investment of Rs 216 crore.
Prime Minister Narendra Modi inaugurated the two-day ‘Bharat Drone Mahotsav 2022’ in the capital.
Cement major India Cements Ltd will monetise some of its land to settle its debt and for capital expenditure, said a top company official.
He also said, in order to recover production costs that went up owing to drastic increase in coal prices, the company will be increasing the cement prices by Rs 55 per bag in three phases between June and July.
Speaking to reporters here on Friday N. Srinivasan, Vice Chairman and Managing Director said the company would monetise surplus land for repayment of loan and for some capital expenditure.
“We are not in distress sale mode. We have about 26,000 acres of land in Andhra Pradesh and Tamil Nadu. The lands are of different categories,” Srinivasan said.
According to him, the company has to repay about Rs 500 crore of its debt and to that extent land monetisation would happen.
India Cements total debt at the end of last fiscal was about Rs 3,000 crore.
The capital expenditure is not much except for some balancing equipment and waste recovery plant in Chilamkur in Andhra Pradesh.
Srinivasan said the company would increase the cement prices by Rs 55 per bag in three parts — Rs 20 on June 1, Rs 15 on June 15 and Rs 20 on July 1.
He said the company’s products are already premium priced.
According to Srinivasan, the consumer has a choice as cement bags are now available in the price points ranging between Rs 320-450.
When queried that other cement players had expressed their plans to reduce their selling prices Srinivasan remarked: “Don’t compare. All costs have gone up. If I don’t increase the prices, I will runup huge losses.”
With a slow recovery in the southern markets further affected by record rains and floods in the previous quarter, the selling price of cement was under constant pressure resulting in uncompensated increase in the cost of production.
This was further compounded by the reduction in volume as the company as a prudent policy withdrew from the far off markets to focus on home markets.
Meanwhile, the company closed last fiscal with a total income of Rs 4,729.83 crore (FY21 Rs 4,460.12 crore) and a net profit of Rs 38.98 crore down from Rs 222.04 crore logged in FY21.
The company Board has recommended a dividend of Re.1 per share of Rs.10 each.
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