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From income tax benefits on home loan to stamp duty rebates, here’s what homebuyers want from Budget 2022

Although demand for housing has increased in recent months, however, keeping in view the current status of real estate and in a bid to give a further boost to the buyer sentiment, lots of things are required to be done.

Budgte 2022 on home buying
The additional tax deduction benefit of Rs 1.5 lakh for interest, which is currently available for home loans sanctioned till 31 March 2022, can be extended for a period of 2 years until 31 March 2024.

The Modi government is making all out efforts for providing ‘Housing for All’ by 2022. However, this still seems to be a distant dream as the Covid-19 pandemic has for the last two years not only hit almost all the industries – including real estate – hard, but has also aggravated the woes of the common man, including homebuyers.

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Although demand for housing has increased in recent months owing to improved homebuyer sentiment, low interest rates, crave for bigger homes, various initiatives undertaken by the government, and the advent of work from home in the post-Covid world, however, keeping in view the current status of real estate and in a bid to give a further boost to the buyer sentiment, lots of things are required to be done.

Homebuyers, therefore, are looking towards the Budget 2022 with much hope. Here are some of their key expectations:
 
Increase the limit of home loan interest deduction

Under Section 24 of Income Tax Act, 1961, a buyer can claim deduction up to a maximum of Rs 2 lakh for interest on the loan taken for acquisition/construction of self-occupied house property. “Given the rising interest and property rates, an increase in the said exemption to at least Rs 5 lakh per annum in the upcoming budget can provide the necessary boost to the residential segment, primarily within the mid or luxury segment, and premium markets such as MMR etc,” says Chintan Patel, Partner and Head – Real Estate, Building and Construction, KPMG in India.

Separate provision for deduction of principal repayment on home loans

A separate annual deduction of Rs 1.5 to Rs 2.0 lakh for principal repayment (other than Section 80C) could help provide an additional fillip to residential sales across India and also help homebuyers reduce their tax burden.

“With high construction costs and property prices, the Budget 2022 can be a way for the government to make it more cost-effective for homebuyers. The maximum limit of principal repayment for tax rebates should be increased from the current Rs 2 lakh to a higher limit or should be categorized as a separate provision in tax rebate. This will help reduce the financial burden of buyers and generate healthy housing demand especially in the affordable housing segment,” says Atul Monga, Co-Founder, BASIC Home Loan.

Extension of benefit under Section 80EEA for first-time home buyers: Additional Tax Benefit for interest on affordable housing loans

The additional tax deduction benefit of Rs 1.5 lakh for interest, which is currently available for home loans sanctioned till 31 March 2022, can be extended for a period of 2 years until 31 March 2024.

“The limit of Rs 45 lakh for affordable housing is on the lower side, considering higher property prices in the metropolitan cities of Delhi, Mumbai, Bengaluru etc. As a result, the tax benefit is not being availed by many and the expectation is to revise the said limit upwards in the coming budget. A geography-wise ticket size revision could help in sustainable demand across cities within this segment and help factor in differential pricing across markets,” informs Patel.

Some industry experts say as property prices have increased, the property price range to be classified as affordable should be increased from the current Rs 45 lakh to something in the range of Rs 60 lakh to Rs 75 lakh.
 
GST Input Tax Credit Revision

With the construction cost increasing across major housing markets in India, provisioning of input tax credit on the existing GST rates for under-construction properties shall provide some respite to the developers and end-users.
 
REITs: Reduction in Holding Period

Reduction in the holding period for REIT units from three years to one year shall help reduce capital gains tax for retail investors. This shall help in increasing retail investor participation in the REIT investment instrument and improve liquidity for developers.

Provide stamp duty rebates across all states

To provide homebuyers with a minor sigh of relief in Covid, many states such as Karnataka and Maharashtra reduced their stamp charges from 5% to 2% in 2021. This step led to a positive outcome as there was a rise in housing sales and at the same time, developers were able to attract small home buyers.

“With an intent to attract more homebuyers in the coming years, there is an expectation that the government realises the need for stamp duty rebates across all states to boost housing demand,” says Monga.

Clarity on tax breaks for under-construction properties

In the absence of express mechanism under the I-T Act to arrive at the date of acquisition of a house property, it has been a vexed issue over the years especially for under construction properties. Reference may be drawn from judicial precedents with different interpretations on the date of acquisition of property i.e., either date of possession, property registration, date of making majority payment, etc. To simplify matters, it may be good to provide specific provisions under the Act to arrive at the date of acquisition to avoid ambiguity.

Further, a home buyer can claim an exemption for long-term capital gains if he/ she invests the capital gains/ sale proceeds of one property/ other long-term asset to buy/ construct another property within specified timelines. However, such exemption is not available if the construction is completed beyond three years.

“This condition potentially penalises a home buyer for reasons beyond his control as there could be delay in construction for varied reasons. It may therefore be considered to extend this period to 5 years (similar to a deduction for interest from borrowed capital in case of constructed properties) or provide for exemption even in case construction is completed beyond 3 years, as also held in various judicial precedents,” says Parizad Sirwalla, Partner and Head, Global Mobility Services-Tax, KPMG in India.

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