Affordable housing segment has received much needed boost as the supply of affordable housing projects is expected to rise. Reason being, the government has proposed to extend the tax holiday for new such projects by one year more.
Looking at the rising demand for affordable housing sector since last 18 months, the real estate developers are planning to launch more affordable housing projects. This will enable them claim 100% tax deduction on profits from such projects. Last year only, the timeline for approval of such projects had been extended by the government on or before 31 March 2020. This step has been taken to show continued interest from realty developers’ side to build and launch more affordable housing projects thereby helping the government to achieve the “Housing for All” objective.
As said by Satish Magar, President, CREDAI National “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”. However, he further stated that the affordable housing sector’s imminent demand for rollover of loans could have boosted the realty industry despite the ongoing liquidity concerns.
The deadline for the first time homebuyers has been extended by the government 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 permissible as tax deduction for all housing segments while housing loan principle repayment of up to Rs 1.5 lakh is tax exempted. This move is anticipated to quicken demand from first time home buyers.
“Keeping in line the fact that the majority of home buyers fall under the lower and mid-income brackets, it is expected that the tax benefit will boost demand substantially. This will considerably aid 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.
In the last year, the government had enabled this additional tax deduction for interest paid on housing loans that were taken between April 1, 2019 and March 31,2020. This is tax deduction is applicable only for houses that were priced below Rs 45 lakh in tier II, III and peripheral parts of metro cities.
The Finance Minister has also projected escalating the limit of difference between circle rate and transaction value for posing tax on income from capital gains to 10% from current 5%. Subsequently, if the transaction value is less than circle rate by over 10%, the difference will be considered 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.