NEW DELHI: Taking ahead the reforms announced in the interim budget, the government has announced major initiatives to boost the housing sector including extending additional deduction of up to Rs 1.5 lakh for interest paid for affordable housing category and by announcing much awaited ‘Model Tenancy Law’
The additional deduction of up to Rs 1.5 lakh for interest paid will be allowed on a loan borrowed up to 31st March 2020, for purchase of an affordable house valued at up to Rs 45 lakh.
Currently, interest paid on housing loan is allowed as a deduction to the extent of Rs 2 lakh in respect of the self-occupied property.
“In order to provide further benefit, I propose to allow an additional deduction of Rs 1.5 lakh for interest paid on loans taken up to 31st March 2020 for a purchasing an affordable house up to Rs 45 lakh in value. Therefore, a person purchasing an affordable house now will get an enhanced interest deduction up to Rs 3.5 lakh. This will translate in to benefit of Rs 7 lakh to the middle-class home buyers over a loan period of 15 years," she said.
In order to align the definition of affordable housing in the Income-tax Act with GST Act, the Finance Minister proposed to increase the limit of carpet area from 30 square meters to 60 square meters in metropolitan regions and from 60 square meters to 90 square meters in non-metropolitan regions.
Another major reform was the proposal of Model Tenancy law.
In her budget speech, Finance Minister said several reform measures would be taken up to promote rental housing. "The current rental laws are archaic as they do not address the relationship between the lessor and the lessee realistically and fairly. A Model Tenancy Law will be finalised and circulated to the states soon," she said.
“Archaic rental laws in the country so far have proved disadvantageous for both, tenants and landlords. The new rental act will bring the required institutional framework in the country and make it more organised and fair for landlords and tenants,” Ramesh Nair, CEO & Country Head, JLL India said.
While developers lauded the additional income deduction, they lamented that the scheme is will hardly benefit those who want to purchase a house costing more than Rs 45 lakh. According to prevailing market rates in NCR areas, any house measuring over 1000 sq feet may surpass the limit of Rs 45 lakh.
“Additional deduction of up to Rs 1,50,000/- for interest paid on loans borrowed up to 31st March 2020 for purchase of an affordable house valued up to Rs 45 lakh are highly beneficial for middle-class buyers,” said Rajeev Talwar, President, PHD Chamber of Commerce and Industry.
On the flip side, the budget estimate for the flagship PM Awas Yojana has been reduced to Rs 25,853 crore from the 2018-19 budget estimate of Rs 27,505 crore. Under the ‘House for All by 2022’ mission, the government aims to build 1.95 crore houses between 2022 under the Pradhan Mantri Awaas Yojana (Gramin) scheme. So far 1.15 crore houses have been built under the PMAY scheme.
In a bid to improve supply, Budget 2019 has proposed to open up land parcels of government and PSUs to be utilised for affordable housing and public infrastructure.
"Large public infrastructure can be built on land parcels held by the central ministry and central public sector enterprises. Through an innovative instrument such as joint development and concession, public infrastructure and affordable housing would be taken up," she said.
Another major announcement was putting housing finance companies under RBI regulation.
Stating that efficient and conducive regulation of the housing sector is extremely important, the National Housing Bank (NHB), besides being the refinancer and lender, is also the regulator of the housing finance sector.
“This gives a somewhat conflicting and difficult mandate to NHB. I am proposing to return the regulation authority over the housing finance sector from NHB to RBI,” Sitharaman added.
• An additional deduction of Rs 1.5 lakh for interest paid on loans taken upto 31st March 2020 for a purchasing an affordable house upto Rs 45 lakh in value.
• A person purchasing an affordable house now will get an enhanced interest deduction up to Rs 3.5 lakh.
• FM proposed to increase the limit of carpet area from 30 square meters to 60 square meters in metropolitan regions and from 60 square meters to 90 square meters in non-metropolitan regions under affordable Housing segment.
• In a bid to improve supply, Budget 2019 has proposed to open up land parcels of government and PSUs to be utilised for affordable housing and public infrastructure.