Affordable housing gets further support as Budget extends tax holiday

2/4/2020 6:17:00 PM

Affordable housing has received a further boost as supply of these projects is expected to increase further as the government has proposed to extend the tax holiday for new such projects by one more year. Realty developers are expected to launch more affordable housing projectsthe segment that has been leading demand pattern since last 18 monthsto claim 100% tax deduction on profits from such projects. Last year, the government had extended the timeline for approval of such projects on or before 31 March 2020. An extension in the dateline is likely to ensure continued interest from realty developers’ side to launch and build more affordable housing projects helping the government achieve the “Housing for All” objective. “The extension of the tax holiday for affordable housing projects will provide more room for additional launches of these projects. However, the demand could have been better if the buyers’ sentiment had also been taken care of,” said Satish Magar, President, CREDAI National. However, he also added that the sector’s impending demand for rollover of loans could have helped the realty industry given the ongoing liquidity concerns. The government has also extended the deadline for the first time homebuyers’ to avail additional Rs 150,000 interest deduction on home loans by a year till 31 March 2021. Currently, loan interest payment of up to Rs 2 lakh is allowed as tax deduction for all segments of housing, while housing loan principle repayment up to Rs 1.5 lakh exempted. The move is expected to prompt demand from first time homebuyers. “Considering that majority of home buyers fall in the lower and mid-income segments, this tax benefit will boost demand substantially. This will significantly benefit first time home buyers who enjoy the benefits of interest subvention under the CLSS (Credit Linked Subsidy Scheme) and the extended tax benefits,” said Ramesh Nair CEO & Country Head, JLL India. Last year, the government had allowed this additional tax deduction for interest paid on housing loans taken between April 1, 2019 and March 31, 2020. This is applicable for houses priced below Rs 45 lakh in tier II, III and peripheral parts of metro cities. The Finance Minister has also proposed increasing the limit of difference between circle rate and transaction value for taxing income from capital gains to 10% from current 5%. Following this, if the transaction value is less than circle rate by over 10%, the difference will be counted as income for buyer and seller. “The direction of the Budget is excellent. However, on one hand the buyers want prices to come down, but the government is limiting the reduction in prices,” said Niranjan Hiranandani, National President, NAREDCO while adding that rental housing should have been given some attention by the government to support Housing for All. Source: The Economic Times

Chandigarh