In a bid to revive the home sales after an unsatisfactory 2019, the real estate industry has urged the government to decrease the interest rate on home loans to 7 per cent and increase income-tax deduction for interest paid on housing loan to Rs 5 lakh.
While presenting its wish list for the upcoming Union budget, industry body National Real Estate Development Council (Naredco) has also asked the government to redefine affordable housing to extend tax benefits to bigger houses that cost more than Rs 45 lakh.
A representation in this regard has been given to the Finance and Housing ministry, as per the latest real estate news. The developers also pointed out that a revival in housing industry will help the overall economy regain its growth momentum in the longer run.
The National President of Naredco, Niranjan Hiranandani said, “Fiscal stimulus to the real estate sector will have a manifold effect on 269 allied industries with multi-dimensional impact on enhancing the GDP growth inclusive of employment creation.”
“In this Budget 2020, Indian real estate sector expects a holistic solution rather than piecemeal solutions that have been offered so far,” he added.
Naredco said that it would take bold fiscal measures to resurrect the reeling industry, as it is facing serious challenges related to liquidity crunch. “Interest rates on home loans shall be reduced to 7 per cent pa (per annum) and the benefit of rate cut should transmit to end-users in order to revive the demand,” said Hiranandani.
The industry suggested tax reforms and raising deduction on home loan interest to Rs 5 lakh from Rs 2 lakh to boost sales. Naredco also called for redefining ‘affordable housing’ because almost all the houses available in Mumbai Metropolitan Region (MMR) most houses in National Capital Region (NCR) and other metros do not fit the existing definition.
A house has to meet the dual condition of not exceeding 60 square meters of carpet area and a price cap of Rs 45 lakh to avail of reduced GST rate of 1 per cent for affordable housing and also the benefit of tax exemption for such projects, as per GST and income-tax laws.
“We recommend that the condition related to price cap of Rs 45 lakh be immediately abolished and the benefits be restored to all the houses which have an area less than 60/90 square meters,” added Hiranandani.
According to real estate consultants Knight Frank’s annual report, housing sales in top eight cities of the country recorded a marginal 1 per cent growth year on year in sales volume in 2019. Against 242,328 units in 2018, the total sales volume was recorded at 245,861 units in 2019. By reducing ticket sizes and unit sizes, the affordability improved as developers aligned themselves with the needs of homebuyers.