Residential real estate is expected to observe a strong upsurge in Tier II, Tier III cities and also in rural areas of India. Both mid-segment and affordable residential units are anticipated to lift up.According to the proposal put forth by the Finance Minister, P. Chidambaram, people who are buying their first home will be permitted an additional deduction of interest upto Rs. 1 lakh based on the terms that the loan amount does not exceed Rs. 25 lakh and the value of the property should not be more than Rs. 40 lakh.This budget was proposed in order to perk up the demands of the affordable residences and to initiate the economy. The loan limit will certainly attract the home buyers of small cities and the economically weaker section of the society. The interest load will considerably get reduced as the additional deduction will take the total deduction against interest payment on home loan to Rs.2.5 lakh.On the other hand, the high class segment will be knocked out by the new budget. The government has announced that there will be reduction of 5% abatement rate ( from 75% it will come down to 70%) of the luxurious and high-end homes with the carpet area of 2,000 square feet or above or houses that are priced Rs.1 crore or more. This will in turn raise the cost of under- construction residences of this segment. The service tax of the high class segment will substantially increase. Therefore the residential real estate market of the metropolitan cities like Mumbai, Delhi and Bangalore may get affected.Apart from that, 1% TDS on real estate transactions of immovable properties will be charged where the consideration exceeds Rs. 50 lakh. This move is brought forward in order to improve the transactions and to increase collection under per capital gain tax.Though the overall real estate sector may not be benefited with the budget, but the affordable housing group will definitely enjoy their piece of cake.