New Delhi: Housing, especially of the affordable kind, got another big push in the 2019 Union Budget, with Finance Minister Nirmala Sitharaman announcing host of incentives to stimulate growth, including an additional Rs 1.5 lakh deduction for interest on loans for the purchase of houses worth Rs 45 lakh.
Currently, the government gives an interest deduction of up to Rs 2 lakh on housing loans for self-occupied property. The deduction will be valid only for interest paid on loans borrowed up to 31 March 2020.
“…A person purchasing an affordable house will now get an enhanced interest deduction up to 3.5 lakh. This will translate into a benefit of around 7 lakh to middle-class home buyers over their loan period of 15 years,” Sitharaman said in her budget speech.
In addition, to align the definition of “affordable housing” in the Income Tax Act with the GST Act, the finance minister also proposed to increase the limit of carpet area from 30 square metres to 60 square metres in metropolitan regions, and from 60 square metres to 90 square metres in non-metropolitan regions.
In the Narendra Modi government’s previous five-year term too, the affordable housing sector had received a boost, thanks to an ambitious programme to provide housing for all in rural and urban areas by 2024. It had also provided a tax holiday on the profits earned by developers of affordable housing.
Housing sector experts said that the fresh moves will go a long way in attracting first-time home buyers.
Anuj Puri, chairman of ANAROCK Property Consultants, told ThePrint that the tax benefits will help “stimulate the demand for affordable housing”.
Allocation for PMAY
Sitharaman has allocated Rs 19,000 crore for the Pradhan Mantri Awas Yojana-Gramin (PMAY-G), the flagship housing scheme in rural areas. This is about Rs 900 crore less than the revised estimate for 2018-19.
She said the government has already built 1.5 crore houses under PMAY-G, and proposes to build another 1.95 crore houses for eligible beneficiaries by 2022.
Meanwhile, the allocation for the PMAY in urban areas has been increased to Rs 6,883 crore for 2019-20, a hike of Rs 378 crore from last year’s figure of Rs 6,505 crore. However, the allocation is not proportional to the thrust given to the programme.
A senior housing ministry official said this is because the ministry has already been permitted to raise funds from outside. “We will be raising Rs 28,000 crore through extra-budgetary resources from agencies like HUDCO and the National Small Savings Fund,” the official, who did not want to be named, said.
Of the one crore houses that are to be built under PMAY (U) by 2024, so far 81 lakh houses have been sanctioned and the construction of 26 lakh houses has been completed.
Rental housing law coming soon
Sitharaman has also proposed several reform measures to promote rental housing, saying current rental laws have become archaic.
“They do not address the relationship between the lessor and the lessee realistically and fairly. A model tenancy law will also be finalised and circulated to the states,” she said.
The Union Ministry of Housing and Urban Affairs will soon come out with the model tenancy law.
ANAROCK’s Puri appreciated the move. “Clear-cut incentives to boost rental housing via a sound policy will positively help the government to further strengthen its housing-for-all initiative,” he said.