Buying that perfect home is an enduring dream of every individual. The sky rocketing property rates, however, only see shattering hopes. Therefore the home shoppers are eagerly awaiting the Finance Minister Arun Jaitley to bring in some reforms with the much awaited Union budget this year.
Rationalisation of deductions of interest on home loans for any under construction property - As of today, deductions on pre-construction interest are only allowed if the project is finished within three years from its starting date; which can be then claimed within five years after getting possession in equal instalments under Section 24B. This time, the buyers hope that deductions can be availed directly after taking the loan, incentivising faster construction and timely delivery of projects.
Streamlining relaxations on home loans. As of now, the exemption for self-occupied houses is of INR 2 lakhs only, while 100 percent tax deductions are available on rented houses. This makes the market pro-investor rather than supporting home buyer. The buyers anticipate full deductions in exemptions, atleast for the first homes. Moreover, home buyers are also expecting extra incentives in terms of exclusion of principal repayment on home loans, making it practically judicious.
Better tax incentives on rental income. Rental Housing is already identified as a catalyst for the housing sector. Only if the Government could take it a level up by not putting the rental income as a separate ‘income’ and hence under the normal tax liability bracket. A special reduced tax slab for ‘Rental Income’ will be a welcome change and further push the rental housing market. Another, incentive that can make rental housing more attractive is increase in percentage of deductible repair and maintenance expenditure. This amount is currently only 30% of the total incurred expenditure, as per Section 24(a). Raising it upto 50% is what home buyers expect from the new budget.
The real estate investors are also bidding for implementation of the Real Estate Regulation Bill, which would bring relief by making the real estate sector more transparent and accountable. We also hope to see home-buyers make a comeback. India is keenly anticipating the next big thing this financial year. Let’s hope this budget brings respite to the home buyers, hoping the long lived dream of moving into the dream home is fulfilled soon.
About the author
Surabhi Arora, leads the research team in India and has more than 13 years of experience in carrying out multi-disciplinary research and analysis in the area of finance and real estate industry. Surabhi specialises in real estate economics, policies, commercial and residential real estate research with in-depth knowledge of market dynamics across major markets in India.