New Delhi: There's bad news for you in Budget 2007, if you want to buy a small house.

That’s because tax exemptions for builders who construct small houses has been done away with.

Take the example of Dipesh Verma, an MNC executive, who has been living in his rented two-bedroom flat for four years, but has never considered it home.

After his marriage to his childhood sweetheart last month, he finally did some calculations and realised that it's a better bet to buy a place however small than rent it out. But Budget 2007 has brought bad news for him.

"I was in touch with this builder. He called me today to say that the property I was interested in will now cost Rs 7 lakh more! I don't have that sort of money," said Verma.

Here's why Dipesh's two-bedroom dream home has become unaffordable. In metro cities like Delhi and Mumbai builders enjoyed tax benefits for construction of houses under 1,000 square feet and in Bangalore under 1,500 square feet. But that tax exemption has been done away with this year.

This means builders will now think twice about making smaller flats, since they no longer get any tax benefit from them. So small and affordable houses could become even more scarce.

"This we were expecting will be extended, so the large contribution of the private sector for mass housing will be available, but unfortunately this has not come in," said Ansal Properties and Infrastructure Chairman, Sushil Ansal.

With the property prices soaring the builders were expecting the worst from this budget. But as it turns out it's not the builders but the common people, who can only afford small houses, have been hit hard.