Budget 2020

To give boost to rental housing, model tenancy law proposed

Garima Singh New Delhi | Updated on July 05, 2019 Published on July 05, 2019

Giving houses on rent may get the required push with much more clarity on the legal front post the Budget. The government announced that it proposes to come up with a model tenancy law to give a fillip to rental housing.

The move will not only help in doing away with the currently prevalent archaic law but will also help realistically and fairly define the relationship between the lessor and lessee. Once finalised, the law will be circulated to the States, said Finance Minister Nirmala Sitharaman.

“Policy on rental housing can be a boon for the sector, there are lot of houses which are locked up and such a policy will encourage more people to give their homes on rent,” said Anshuman Magazine, Chairman and CEO, India, South East Asia, Middle East and Africa, CBRE.

More people will have access to affordable housing through rental housing, added Magazine.

Sop for affordable housing

The Budget also proposed additional incentive for the purchase of affordable housing. It proposed to provide a deduction up to ₹1,50,000 for interest paid on loan taken for purchase of residential house with a value of up to ₹45 lakh. This deduction of interest for affordable housing will be in addition to the existing interest deduction of ₹2 lakh.

Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to ₹3.5 lakh.

“The additional incentive of ₹1.5 lakh on interest on loans borrowed under affordable housing would give a boost to the real estate sector,” said Niranjan Hiranandani, National President NAREDCO and MD Hiranandani Group.

The government’s idea to provide affordable housing will be a possibility in almost all the cities except Mumbai where there is a paucity of land, felt Hiranandani.

In the context of carpet area, the Budget proposed to increase its limit from 30 sq mt to 60 sq mt in metropolitan regions to align the definition of affordable housing in the Income Tax Act with the GST Act. In the non-metropolitan regions, the limit will increase from 60 sq mt to 90 sq mt.

Sitharaman also proposed that the housing finance sector regulation authority return back to the purview of the RBI from the National Housing Bank.

She said the necessary proposals had been placed in the Finance Bill.

“Further taking housing finance companies into the RBI ambit is a welcome step towards more compliance and regulatory requirements,” commented Pankaj Bansal, Director, M3M Group.

Published on July 05, 2019

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