The last three years have been good for homebuyers. Low-interest rates amid the Covid-19 pandemic outbreak and subdued home prices fuelled rising demand for homes as people shifted to working remotely as offices shut down. Home loan rates have since gone up, but demand for housing is still intact. Experts believe that to sustain demand, the government should introduce homebuyer-friendly measures in Budget 2023.
Union Finance Minister Nirmala Sitharaman will table the Budget 2023 in Parliament on February 1, 2023. Industry leaders from various sectors have pinned high hopes on the Budget 2023 and expect some of the key announcements from FM Nirmala Sitharaman under Modi Government.
Here are Some of the Key Expectations of Home Buyers:
Separate Deduction for Home-Loan Principal Repayment
This is a long-pending demand. The deduction limit under Section 80C is up to Rs 1.5 lakh. But the basket of eligible investments and expenses for this deduction is packed with nearly 10 items, one of which is principal repayment on a housing loan.
In most cases, people exhaust the 80C limit with the mandatory contribution to the employees’ provident fund and children’s tuition fee. If left with some room, the premium on life insurance policies fills that gap. Hence, there is hardly any room left to claim a home-loan deduction on the principal amount.
Enhance Section 24B
Besides principal repayment, a borrower also needs to pay interest on a home loan. Given that home buying needs a large amount of money, many borrowers take huge home loans. As a result, a big chunk of their income goes into servicing interest on the home loan. For many,yearly interest payments on home loans are much higher than the upper limit of the deduction they can claim.
With policy rates increased by 225 basis points this year, home loan interest also went up parallelly. Therefore, an outgo in the form of interest is set to increase for most buyers. And that has led to the demand to enhance the deduction limit against interest payment.
Archit Gupta, founder and CEO of tax and investing platform Clear, agrees that there is a need to enhance the deduction limit. “With the RBI rate hikes, home loan interest rates could go up. This could overstretch those who are paying EMIs, straining their ability to save and invest, and also deter people from entering the home-loan space. The government could look at supporting them by increasing tax benefits on home-loan interest payment, bringing it to Rs 2.5 lakh or Rs 3 lakh from the current Rs 2 lakh.
Relaxation of Capital Gains Criteria to Support Homebuyers and Improve Affordability
Under section 54 of the Income Tax Act, long-term capital gains from sales of an existing house can be utilized in buying or constructing a new property. If the investment for exemption is done through an under-construction property, it can be claimed only if the construction of the property is completed within three years of the sale of the earlier house.
Residential projects are continuously increasing in scale in terms of the number of units, height, and amenities which causes them to have completion timelines in excess of three years. Also, while the implementation of RERA has caused an improvement, the completion timelines of under-construction projects frequently exceed deadlines. This causes significant hindrances to homebuyers in setting-off capital gains in under-construction properties. To mitigate this, we recommend that the completion timeline of under-construction properties be extended to five years instead of the existing three.
Most importantly, the government must seriously reconsider revising the pricing of homes within the affordable housing budget city-wise. While size of units as per its definition (60 sq. m. carpet area) is fairly appropriate, the price of units (up to Rs 45 lakh) is not viable across most cities.
For instance, for a city like Mumbai, a less than Rs 45 lakh budget is far too low and it needs to be increased to at least Rs 85 lakh or more. As for other top cities, the budget should be increased to at least Rs 60 lakh to Rs 65 lakh.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
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