Strong measures will boost investment in real estate
The real estate sector contributes significantly to the Indian GDP; a buoyant sector results in cascading positive effects on the economy. The present economic environment has impacted the real estate sector in terms of higher interest costs both for home buyers as well as developers, reduced liquidity due to slower retail sales and high cost of funds.
With Budget 2012 being around the corner, it provides the Government an opportunity to address the problems plaguing the housing sector to ensure better quality homes at affordable prices. Some key matters for consideration are discussed below.
The Government should increase tax deduction for interest on loans for self-occupied property from Rs 150,000, to Rs 300,000 and the limit of deduction under section 80C beyond the existing limit of Rs 1 lakh on principal repayments of home loans. This would encourage an individual to buy a house and enable him to repay the bank loans at a faster rate.
Last year, the government had extended 1% interest subsidy for home loans up to Rs 15 lakhs where the cost of house does not exceed Rs 25 lakhs. The scope of this subsidy could be amplified to include a wider price band of budget housing to benefit home buyers , especially in lower income groups. Presently, very few realty projects (especially in metropolitan cities) offer houses costing less than Rs 25 lakhs.
RBI recently sought to exclude the cost of stamp duty, registration and other charges while calculating value of a property for granting home loan. RBI may have intended to curb speculation in the real estate sector by seeking to curb buyers who purchase houses for investment purposes and to ensure that the home buyer contributes a higher proportion of total cost.
With Budget 2012 being around the corner, it provides the Government an opportunity to address the problems plaguing the housing sector to ensure better quality homes at affordable prices. Some key matters for consideration are discussed below.
The Government should increase tax deduction for interest on loans for self-occupied property from Rs 150,000, to Rs 300,000 and the limit of deduction under section 80C beyond the existing limit of Rs 1 lakh on principal repayments of home loans. This would encourage an individual to buy a house and enable him to repay the bank loans at a faster rate.
Last year, the government had extended 1% interest subsidy for home loans up to Rs 15 lakhs where the cost of house does not exceed Rs 25 lakhs. The scope of this subsidy could be amplified to include a wider price band of budget housing to benefit home buyers , especially in lower income groups. Presently, very few realty projects (especially in metropolitan cities) offer houses costing less than Rs 25 lakhs.
RBI recently sought to exclude the cost of stamp duty, registration and other charges while calculating value of a property for granting home loan. RBI may have intended to curb speculation in the real estate sector by seeking to curb buyers who purchase houses for investment purposes and to ensure that the home buyer contributes a higher proportion of total cost.
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