Will There Be a 5 Lakh Deduction on Home Loan Interest Rate in Budget 2020?
The real estate market has undergone significant improvements in recent years and has become more visible and trustworthy as one of the significant contributors to India's GDP. One can't ignore the fact that the real estate sector in India is having its own set of enemies and is struggling hard to get on full swing. But, will Nirmal Sitharaman budget 2020-21 performs any better for the real estate sector? Regardless of the answer being, YES or NO, budget 2020 expectations among real estate stakeholders are piling up.
The real estate sector in India is in a need to confront the drastic liquidity crunch following a series of debts by high profile non-banking finance companies (NBFCs). Most builder firms have been facing trouble repaying NBFCs with a slump in the residential property market. In compliance with Section 24 of the Income Tax Act, the real estate industry requires further steps like higher deductions on payment of the interest in loans. Any change to the Rs 2 lakh interest rate will help to revitalize demand in the domestic sector, particularly in the mid-to economic segment of the budget
With Indian Finance Minister Nirmal Sitharaman announcing Union budget 2020 on February 1st, the Confederation of Indian Industry (CII) demanded an increase in the home loan interest rate deduction to Rs 5 lakh before the introduction of the Union Budget 2020. It stated that in the Pre-Budget Memorandum, the current limit of Rs 2 lakh does not match the interest burden borne by taxpayers, as prices rise substantially.
At the moment, the highest interest deduction limit charged on the home loan paid is kept at Rs 2,00,000. As per the Confederation of Indian Industry, if there is a rise to the Rs 5 lakh cap, it would boost the real estate market and promote the income tax assessees. This should come without any strings attached like the interest deduction available on home loans for houses priced up to Rs 45 lakh by Rs 1.5 lakh, making the total deductions to Rs 3.5 lakh per annum.
Why There is a Need of Industry Status for Real Estate in Budget 2020?
In budget 2020, the Government needs to provide special industry status and need to introduce single-window clearance. It must rethink the income tax burden to raise the market and open up more financial options to developers to increase demand for real estate in India. Reinstatement of income tax benefits to a second home is expected to help home buyers and improve the real estate sector too.
In November 2019, the Government announced a special window of Rs. 25,000 credit for stalled property projects, in a move to revive the distressed sector. Finance Minister Nirmala Sitharaman said that the Government is going to contribute an amount of Rs 10.000 crore to the Alternative Investment Fund (AITF), and the State Bank of India and LIC jointly give the remaining amount.
She added that this initiative would support more than 1,600 housing projects in stagnant areas, including 4,58 lakh housing units across the country. For the real estate sector, the union budget 2020-21 must also consider other aspects in the forthcoming budget to encourage the renting of housing to cope with the lack of services. Eliminating or combining stamp duty charges with current GST rates may reduce customers' prices and provide personal tax relief.
The Government has taken a series of crucial decisions to revive the real estate sector, which has improved consumer confidence and are expected to bring about positive results to the Indian real estate market to entice developers and companies. Everyone hopes that the budget 2020 akes more developer and investor-friendly initiatives for the progress of the real estate market.
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