What Budget 2024 holds for home loan interest rates

With strong expectations and speculations circulating, particularly concerning tax rebates and home loan interest rates, stakeholders are keenly assessing the potential impact on homebuyers and the broader real estate market.

Budget 2024, Union Budget 2024, home loan, home loan interest rates, Budget 2024 expectations, real estate, deduction for home loan interest, Section 24 of Income Tax Act, affordable housing, impact on homebuyers

The real estate industry in India stands at the cusp of transformation as the eagerly-awaited Budget 2024 approaches during this election year. The focal point of anticipation revolves around the potential amendments that could reshape the industry’s dynamics. Stakeholders keenly await clarity on crucial aspects, including an increase in the maximum deduction for home loan interest and additional tax benefits for first-time homebuyers.

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These expected changes carry the promise of invigorating the real estate market, especially in the budget housing segment that has witnessed a decline in demand. Amidst this anticipation, it is evident that the real estate landscape is poised for a pivotal juncture, where government policies and financial directives will play a decisive role in charting the course for the industry’s growth and resilience.

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Expectations from Budget 2024

The real estate industry in India is at the cusp of keen anticipation as Budget 2024 looms on the horizon, especially in the midst of an election year. One of the foremost expectations from Budget 2024 revolves around the revision of the maximum deduction for home loan interest under Section 24 of the Income Tax Act.

Currently capped at Rs 2 lakh, industry experts advocate for a substantial increase, proposing a new limit of at least Rs 5 lakh. This adjustment is seen as pivotal, particularly in rejuvenating the budget housing segment, which has witnessed a decline in demand. The augmentation of this deduction has the potential to infuse renewed vigor into the market, encouraging prospective homebuyers to invest in affordable housing options.

Additionally, stakeholders are anticipating the introduction of additional tax deductions tailored for first-time homebuyers. Envisaged benefits for new homeowners are expected to not only make property acquisition more attractive but also serve as a catalyst for reinvigorating the overall housing market. These incentives are viewed as strategic measures to enhance homeownership, fostering a conducive environment for sustained growth.

In addition, there is a collective hope within the industry for the extension or enhancement of tax benefits for affordable housing loans and projects. With the current benefits set to expire in March 2024, the continuation or expansion of these incentives could significantly bolster the government’s ongoing initiatives in the affordable housing domain. Such support aligns with the broader national objective of ensuring housing affordability and accessibility, addressing the critical need for shelter across diverse demographic segments.

Potential Impact on Homebuyers

The proposed increase in the maximum deduction for home loan interest under Section 24 of the Income Tax Act, from the existing limit of Rs 2 lakh to a suggested Rs 5 lakh, is anticipated to have a profound effect. This adjustment is viewed as a positive catalyst, potentially revitalizing the budget housing segment, which has experienced a decline in demand.

Simultaneously, the prospect of additional tax deductions for first-time homebuyers is expected to present new opportunities for prospective homeowners. By stimulating the housing market through targeted incentives, this measure could foster increased homeownership and contribute to a more vibrant real estate landscape.

As these proposed changes are analyzed, their potential impact on various segments of the real estate market becomes evident. The overarching goal is to enhance affordability and accessibility for a wider range of buyers, aligning with the industry’s commitment to serving diverse demographic segments.

Non-Budget Factors Affecting Home Loan Interest Rates

The real estate industry in India is intricately intertwined with the fiscal policies set by the government and the monetary measures administered by the Reserve Bank of India (RBI). While the focus remains on the impending Budget 2024, it is crucial to acknowledge non-budgetary factors that exert a substantial influence on home loan interest rates.

Notable among these factors is the anticipated role of the RBI, with expectations for repo rate cuts in 2024. As the central bank navigates economic dynamics, the connection between these anticipated rate adjustments and subsequent lending rates from banks becomes paramount. The RBI’s strategic decisions are poised to play a pivotal role in shaping the financial landscape for prospective homebuyers.

Potential reductions in home loan interest rates, albeit not directly tethered to the budget, are noteworthy. Anticipated repo rate cuts could translate into lower lending rates from banks, indirectly enhancing affordability for homebuyers. This indirect impact is poised to have far-reaching implications for both the real estate industry and individual homebuyers, creating an environment conducive to increased real estate transactions and market growth.

Conclusion

The real estate sector is on the brink of transformation, poised for positive outcomes in Budget 2024, with a recognition of the collaborative role played by government policies and central bank actions in shaping the housing market. Expectations center around amendments to tax rebates and home loan interest rates, with a proposed increase in the maximum deduction for home loan interest and additional benefits for first-time homebuyers.

These changes could spark a revival, particularly in the budget housing segment. While awaiting official announcements, the intertwined influence of government policies and the Reserve Bank of India (RBI) is crucial. Anticipated repo rate cuts by the RBI in 2024 might indirectly lower home loan interest rates, enhancing affordability for homebuyers.

(By Avneesh Sood, Director, Eros Group. Views are personal)