This is what housing finance companies expect from Union Budget 2015

The new government swept into office last May in a wave of hope and optimism. The budget that it presented within two months off assuming office was a placeholder, which paves the way for a full-fledged budget later this month.

This budget is very important and an eagerly anticipated one. It is an opportunity for the government to lay out its economic vision for the growth and development of the country. I expect the budget to be formulated along the following four objectives:

· Road map for fiscal prudence
· Tax and financial sector reform
· Commitment to the social and rural sector
· Creation of housing and infrastructure

Specifically, for housing finance companies, there are a few steps that can be taken which will lower the cost of home ownership and make it more accessible.

Infrastructure Status

The housing finance industry (HFI) should be given infrastructure status. This would then open up several new avenues of long-term funds. HFI can issue infrastructure bonds which qualify for tax benefits. Further the industry can raise funds in the overseas markets through the External Commercial Borrowing (ECB) route. Funds raised in these ways will be cheaper, even after factoring the cost of hedging, thus leading to lower-lending rates.

Allow reverse rate window

Opening the Repo/Reverse repo window for HFI along the lines of Banks would help this industry manage its short-term liquidity more optimally by borrowing from/lending to the RBI.

Develop low-cost housing industry

The government could hasten the development of the nascent low-cost housing industry and specific satellite townships by providing tax incentives to the investors. As an example: Rental incomes in these properties could be tax free for a specified period of time.

Revise limit for deduction on interest and principal paid

The limit for deduction of interest and principal paid on home loans for self occupied properties can be revised from the current Rs 2 lakh and 1 lakh, respectively, in keeping with the current prices of property.

Remove multiplicity of stamp duty

Stamp duty is a large component of the cost of acquiring a house, and in some states, it’s going up to 16%. This could do with some reduction. There should be a mechanism of ensuring that the stamp duty paid by the developer for acquisition of the property is deducted from that paid by the final purchasers.

About the author: Anil Kothuri heads the Retail Finance vertical at Edelweiss Capital.