Home loan sops likely to set off building boom

City realtors say a place like Hyderabad needs more boost

Published: 01st March 2013 10:13 AM  |   Last Updated: 01st March 2013 10:13 AM   |  A+A-

Announcing incentives to home loan borrowers, Union finance minister P Chidambaram, in his budget speech on Thursday, said any person taking a first-time home loan up to Rs 25 lakh during the financial year 2013-14 will be allowed an additional tax deduction of interest of up to Rs 1 lakh.

Certainly, this is a move that will bring cheer to many prospective home owners, but for a city like Hyderabad, which experts say is set for a boom, this appears to be just ‘good news’ rather than a great news.

Responding to the announcement on home loans, P Premkumar, president, Andhra Pradesh Real Estate Developers Association (APREDA), could only wonder why the government has set the limit only at Rs 25 lakh. “Hyderabad real estate is set for a boom. Prices are so low and interest rates are 10-10.25 percent; this move would certainly encourage housing and real estate, but they should have spread the sops across the board,” he said.

The finance minister had hoped that the measure will help promote affordable housing and also provide employment to many in the construction sector. City-based builder M Shyam Sundar said, “It is a first of its kind move. This will benefit salaried and business class alike. It is a right decision for Hyderabad at a right time.”

However, there are some who seek more clarity. “Is this benefit available only this year? Why is it only for those who take home loan for the first time?” asked Nageswar Reddy, a software professional.

On the other hand, welcoming it as a boon for the salaried class, Vijay Kumar, a teacher at St Mary’s Degree College, said, “Compared to the earlier limit of Rs 1 lakh under 80C, this will be a big deduction. Housing is a crucial issue faced by today’s middle class and this additional benefit will reduce tax liability.”

At present, the housing loan instalment amount deductible from from the salary is Rs 1.50 lakh. If it is increased by Rs 1 lakh, first-time home buyers/builders will be eligible to deduct Rs 2.50 lakh from their income. Explaining the expected impact, N Sridharan, branch manager, Andhra Bank, Makhtal, said, “This will result in reducing the tax burden, while at the same time lead to creation of an asset, which means that more people will take home loans. This will lead to an increase in interest earnings, resulting in profits for the bank. Also, more demand for housing will mean more demand for steel, cement, labour etc, because of which economy will start going up.”

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