In a few hours from now, Finance Minister Nirmala Sitharaman will present her second Union Budget before the Parliament. Ahead of Budget 2020, industry bodies and experts have suggested several measures to encourage home buyers to invest in real estate. These suggestions include better tax benefits, revised definition for affordable housing, and even incentives for rental housing.
Real estate industry had a bittersweet 2019 - while commercial or office real estate boomed last year, sales in residential real estate dipped 22 per cent in the first half of financial year 2019-20. Amid worsening economic slowdown and popularisation of rental housing, people refrained from buying homes.
To turn things around this year, the real estate sector and other industry bodies have come up with a list of demands that the Finance Minister could incorporate in Budget 2020.
FULL COVERAGE:Union Budget 2020
Better tax benefits
Experts have called for increase in tax deduction on home loan interest in order to attract more buyers. Taxpayers can claim interest paid on home loans as a deduction while calculating taxable income. Presently, the deduction is capped at Rs 2 lakh for self-occupied property. There is no such limit in the case of let-out property. Industry body Confederation of India Industry (CII) has asked that the deduction limit should be increased from Rs 2 lakh to Rs 5 lakh. SBI Research Desk had recommended a more prudent hike to Rs 3 lakh, which will cost the exchequer Rs 15,000 crore.
Reforms in affordable housing
Modi government has been emphasising on "housing for all" since it first came into power. Now the industry has called for a change in the definition of affordable housing. For instance, CII has asked for increasing the income criteria under PMAY scheme to Rs 18 and 25 lakh from the current Rs 12 and 18 lakh in the MIG I and MIG ll categories, respectively. This would help include more home buyers under the housing scheme, and create demand for affordable homes in the sector.
Incentives for rental housing
The existing provisions of Income-Tax Act allow a standard deduction of 30 per cent from the net annual value of a rented house for repairs and maintenance. This net annual value is calculated by deducting the amount of municipal taxes paid from the gross rental value, which usually is the rental income. Considering the rising costs of repairs and maintenance, industry stakeholders have called for standard deduction to be raised from 30 per cent to 50 per cent.