Budget 2021

A leg-up for affordable homes

Bavadharini KS BL Research Bureau | Updated on February 01, 2021 Published on February 01, 2021

With improved demand conditions, the Budget has made provisions that encourage buyers

The Covid-19 relief measures announced by RBI and the Centre have helped individuals, especially home-buyers. It presented them with an opportunity to purchase a house property given the multi-year-low home loan interest rates and stable housing prices. The work-from-home norm adopted by many companies further helped improve the residential demand for house properties both in urban and semi-urban regions.

Taking cues from improving demand conditions, the Budget this year has continued to encourage buyers in the affordable housing category.

The Centre has extended the deductions available under Section 80EEA on interest available for housing loans sanctioned up to March 31, 2022. However, extension of interest concessions under the Credit Linked Subsidy Scheme (CLSS) have been ignored.

An upside

Given the favourable macro environment in residential real estate, this year’s Budget has given a nudge to first-time home- buyers.

The Centre has extended Section 80EEA, which provides deduction of ₹1.5 lakh on interest for housing loans sanctioned from April 1, 2019 to March 31, 2022.

The deduction continues to apply for first-time home- buyers who purchase affordable house property (valued up to ₹45 lakh).

This deduction continues to be available over and above the ₹ 2-lakh deduction for interest on housing loan under Section 24.

This, along with low home loan rates (6.9-9.9 per cent) and stable property prices, make it attractive for those considering a home buy today.

According to Knight Frank, a real estate consultant, the property prices in December 2020 fell across the top seven cities in India when compared with same period last year. For instance, in Mumbai the property prices were down 3.2 per cent y-o-y, and in Chennai, it was down 9 per cent y-o-y.

But a downside too

To ensure affordable housing for people from all income categories, the Central government had earlier introduced a Credit Linked Subsidy Scheme.

The benefits here are targeted at individuals from economically weaker sections (EWS), the lower income group (LIG) and the middle income group (MIG).

Through CLSS, the Centre provides direct subsidy on home loans taken by first-time buyers (with incomes below specific thresholds) of affordable homes.

Initially, individuals falling under both MIG categories could get loans at concessional rates up to March 31, 2020.

In May 2020, as part of Covid-19 relief measures, the deadline was extended up to March 31, 2021.

It was expected that this deadline would be extended again in the Budget, but that wasn’t the case.

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Published on February 01, 2021
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