The year 2021 in many ways was the year of hope and revival whereas 2022 will be the year to sustain the growth momentum. Low interest on home loans, stamp duty cuts, and extension of tax benefits on affordable housing, as announced in the previous budget, helped the sector reach almost 90 per cent of pre-covid numbers. With the Union Budget to be announced by finance minister Nirmala Sitharaman today at 11 am, here are some of their key expectations that would help retain the momentum in the real estate sector, boost sales.
Separate provision for deduction of principal repayment on home loans
A separate annual deduction of Rs 1.5 to Rs 2.0 lakh for principal repayment (other than Section 80C) could help provide an additional fillip to residential sales across India and also help homebuyers reduce their tax burden. “With high construction costs and property prices, the Budget 2022 can be a way for the government to make it more cost-effective for homebuyers. The maximum limit of principal repayment for tax rebates should be increased from the current Rs 2 lakh to a higher limit or should be categorized as a separate provision in tax rebate. This will help reduce the financial burden of buyers and generate healthy housing demand especially in the affordable housing segment,” says Atul Monga, co-founder, BASIC Home Loans.
Increase the limit of home loan interest deduction
Under Section 24 of Income Tax Act, 1961, a buyer can claim deduction up to a maximum of Rs 2 lakh for interest on the loan taken for acquisition/construction of self-occupied house property. “Given the rising interest and property rates, an increase in the said exemption to at least Rs 5 lakh per annum in the upcoming budget can provide the necessary boost to the residential segment, primarily within the mid or luxury segment, and premium markets such as MMR etc,” says Chintan Patel, partner and head – real estate, building and construction, KPMG India.
Additional Tax Benefit for interest on affordable housing loans
The additional tax deduction benefit of Rs 1.5 lakh for interest, which is currently available for home loans sanctioned till March 31, 2022, can be extended for a period of 2 years until March 31, 2024. “The limit of Rs 45 lakh for affordable housing is on the lower side, considering higher property prices in the metropolitan cities of Delhi, Mumbai, Bengaluru etc. As a result, the tax benefit is not being availed by many and the expectation is to revise the said limit upwards in the coming budget. A geography-wise ticket size revision could help in sustainable demand across cities within this segment and help factor in differential pricing across markets,” said Patel.
Some industry experts say as property prices have increased, the property price range to be classified as affordable should be increased from the current Rs 45 lakh to something in the range of Rs 60 lakh to Rs 75 lakh.
Reduction in Stamp Duty
To make the housing market more affordable, the government has been trying to reduce stamp duty by announcing a few schemes. “In Maharashtra, for instance, it was announced that from April 1, 2019, onwards, there would be a reduction of 2 per cent in stamp duty. This is a welcome move as it will help bring down the price of homes and make them more affordable,” said Monga.
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