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With the majority of home-buyers falling in the low and mid-income brackets, the extension of tax benefits in the Budget will boost the demand for affordable housing, even as it reinforces the Government’s focus on the sector.
In her July 2019 Budget, Finance Minister Nirmala Sitharaman provided an additional deduction of interest, amounting to ₹1.5 lakh, for loan taken to purchase an affordable house till March 2021. Now, it has been extended by another year to March 31, 2022. Further, tax holidays for affordable housing projects have also been extended by one year to March 31, 2022.
Priority areas
Announcing the proposal, the Finance Minister said the Government sees ‘Housing for All’ and affordable housing as priority areas.
“The proposals are to reinforce the Government’s focus on affordable housing, which are beneficial to both buyers and developers. The tax exemption for notified affordable housing for migrant workers, and the deduction on payment of interest for affordable housing being extended by a year will give a fillip to this emerging segment,” Niranjan Hiranandani, National President of National Real Estate Development Council, said.
Also read: A leg-up for affordable homes
“As affordable housing attracts only 1 per cent GST and ₹1,000 stamp duty in Maharashtra, it will augment the production of affordable housing in the state,” Hiranandani, who is also the managing director of real estate developer Hiranandani Group, said.
This year’s Budget also proposed incentivising rental housing for migrant labourers and to promote affordable rental under Section 80- IBA of the Income-Tax Act, and this scheme will be notified in due the course.
Boost confidence
“Needless to add, these proposed steps will strengthen the overall real estate sector and boost confidence amongst buyers and builders alike. However, if the long-standing demands of the sector like granting industry status, rationalising GST rates (by allowing input tax credit), access to funds and ensuring longer repayment cycles, lowering tax on raw materials, and increasing ₹2 lakh tax rebate on housing loan interest rates to at least ₹5 lakh could have been taken - it would have gone a long way to support the real estate developers and generate healthier housing demand,” JC Sharma, Vice Chairman and Managing Director of Sobha Ltd, said.
According to Knight Frank India Chairman and Managing Director Shishir Baijal, “The government has also continued its focus on affordable housing segment by extension of tax benefit by one year. Amid the prolonged pandemic scenario, this extension was needed to support the latent housing demand in the country. Further, the relaxation on tax compliance for REIT (real estate investment trusts) investors will further improve the marketability of such products considering we are likely to witness new REITs this year”.
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