Budget expectations: Homebuyers expect the budget to make property purchase easier

• The government is expected to boost the sentiment of homebuyers this Budget.
  
  
• A key proposal from the industry is to increase interest deduction limit u/s 24(B), which can help improve savings of the homebuyer.
  
  
• Experts also say that a separate section for tax deduction on principal repayment can also help.
  
  
• Revision in the price bandwidths for homes to qualify as affordable housing can help people in metros where property prices are high.
  

It’s not just captains of India Inc that have a wishlist ahead of the Budget, common people too have their hopes pinned on the Finance Minister. And for the common Indian, especially the homebuyers, there are some key expectations when it comes to budget proposals that will make buying a home cheaper, easier and more convenient.

Since interest rates have gone up significantly in the last few months, it is expected that the Government will take some key steps to boost the sentiment of homebuyers. Let us take a look.

Separate section for tax deduction on principal repayment: Home loan principal repayment is eligible for deduction u/s 80C of the Income Tax Act. However, most home buyers do not get to claim this deduction as there are several other investments and expenses that also qualify for the 80C deduction of up to ₹1.5 lakh.

“So, it's high time that the government should provide a separate deduction for home loan principal repayment,” says Pradeep Aggarwal, founder and chairman, Signature Global, a real estate developer focusing on affordable and mid-segment housing.

Increase in interest deduction limit u/s 24(B): The maximum deduction available u/s 24B for home loan interest payment is ₹2 lakh. “The home loan interest deduction should be increased from ₹2 lakh to ₹4 lakh for tax rebate under section 24(B). This will effectively improve savings of the home buyer and aid them in their one buying decision,” says Samantak Das, chief economist and head of research, JLL India.

More boost to affordable housing: “The government must offer more incentives to boost affordable housing. To a noticeable extent, the pandemic derailed the affordable housing growth story since early 2020 – one segment which the current government has rightly stressed on since taking charge in 2014,” says Anuj Puri, chairman, Anarock Group.

The affordable housing supply by private players has reduced significantly since Covid-19, largely because its buyer class was impacted economically and hence went into wait-and-watch-mode. Now, there is a need to make this segment attractive again, not least of all because it resonates well with the government’s housing for all initiative.

Further, Section 80IBA provided 100% tax holiday for affordable housing projects that were approved till March 31, 2022. “As the need for affordable housing is expected to continue over the next few years, an extension of the project approval deadline by three years until March 2025 will provide meaningful support to the growth of affordable housing projects,” says Das.

Revision of price bandwidth for homes to qualify as affordable housing:

“Perhaps most importantly, the government should seriously consider revising the price bandwidths for homes to qualify as affordable housing to align with the market dynamics of different cities. The size of units as per the current definition (60 sq. m. carpet area) is fairly appropriate, but the catch-all pricing band of up to revising the price bandwidths for homes to qualify as affordable housing. ₹45 lakh for affordable housing is definitely not appropriate across most cities,” says Puri.

For instance, a price band of ₹45 lakh or below is far too low in a city like Mumbai, where it should be increased to ₹85 lakh or more. In other major cities, the qualifying price band should be increased to ₹60-65 lakh. Such a move would have more homes qualifying as affordable housing, and many more homebuyers would be able to avail the current benefits like reduced GST at 1% without ITC, and other government subsidies.

Enhancement and extension of Section 80EEA to claim interest deduction on home loans for first-time homebuyers

Demand for residential real estate has witnessed robust recovery post the pandemic. “The decision of new home buying may witness continued momentum if the benefit of interest deduction for first-time home buyers is reinstated. As this benefit was provided for loans availed till March 31, 2022, an extension of this provision with an enhanced limit ₹2.5 lakh interest deduction will help homebuyers in the lower and mid-income segments,” says Das.

India’s real estate sector which has picked up pace since the pandemic, is expected to see robust growth in the coming years. Some of the proposals, if considered, will not only provide a boost to the sector, but also bring a smile to the faces of homebuyers.

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