Dhruv Agarwala, co-founder and CEO, PropTiger-Housing.com
While the Union Budget 2017-18 has brought in a host of measures to boost the real estate industry, the cap on loss of income to Rs2 lakh is a dampener for investors, as the effective rental yields will come down substantially.
Under the new proposal, with the loss of income capped at Rs2 lakh, the tax saving will only be about Rs62,000. The effective rental yield rises marginally to 2.3% (Rs4.62 lakh).
In my opinion, the proposed changes will make investment in a second home unattractive, especially in markets that have low capital appreciation and low rental yields.
This impacts luxury properties more than other segments even though the law applies equally across all segments. Since the tax saved is more for higher tax brackets, this tax advantage would have been availed more by wealthier individuals who bought luxury properties, and, hence, the greater impact on luxury properties.
