Budget 2022: Cut in home loan interest rate, infra upgrades may make PM’s housing for all a reality

Union Budget 2022-23: Among the direct benefits, Budget 2022 might bring a potential relief to direct home buyers with an increased limit of home loan interest deduction for tax rebate from Rs 2 lakh to Rs 5 lakh

Ravindra Sudhalkar January 21, 2022 13:31:48 IST
Budget 2022: Cut in home loan interest rate, infra upgrades may make PM’s housing for all a reality

Indian Union Budget 2022: Home loaon interest cut may give PMAY a boost. Reuters

As the Union Budget is around the corner, the anticipations from across the industries are on a rise. With the economic advisors expecting India’s growth to be between 7 percent-7.5 percent, the prime focus of the government will be to strategise a growth plan to lift the economy from the COVID-19 slump. The nation is anticipating higher focus on development of healthcare, infrastructure, affordable housing, MSMEs, startups and innovations.

The last two years have witnessed a great strain on all the sectors; however, the home finance and real estate sectors saw a higher downfall with declining demands and investments. Though the sector is now picking up pace with top eight cities claiming a market share of almost the pre-pandemic era, the individuals, investors and overall Industry is looking forward to higher support from this Union Budget, to further this growth.

Speculations are that the government will strengthen agenda of both, affordable and rental housing with a robust roadmap to enable the sector to be future-ready.

The litigation of reduced taxes on mortgage loans and increase in allocation towards the Ministry of Housing and Urban Affairs of Rs 54,581 crore, stood as one of the biggest successes of Budget 2021. Building on this, the expected propositions such as deduction in home loan interest rate, infrastructural upgrades, and increased capitalisation of real estate, monetising extra revenue to build higher assets etc., will propel Prime Minister Narendra Modi’s vision of Housing for all under Pradhan Mantri Awas Yojana (PMAY) and fortify the existing financing system.

Boost for buyers and Investors

Among the direct benefits, Budget 2022 might bring a potential relief to direct home buyers with an increased limit of home loan interest deduction for tax rebate from Rs 2 lakh to Rs 5 lakh. Moreover, a personal tax relief, either with tax cuts or revision of tax slaps could support the sector with increased demands since the last increase in deduction limit was witnessed in 2014.

Buyers will further look forward to a mainstay on the demands of the industry with ease in availability of finances and GST rate reductions. If these expectations are met in this coming Budget, it will enhance the disposable income for the taxpayers and lead towards cohesive growth for the sector.

Upholding support for industry

According to the Ministry of Housing and Urban Poverty Alleviation, affordable housing is defined based on the property size, its price, and the buyer's income. In the forthcoming financial year, the government might also look at redefining affordable housing criteria to outspread the benefits of additional deduction to a larger market.

Moreover, if the government extends the deadline for government housing projects with the added benefits of reduced stamp duty charges, lowered long-term capital gains tax for real estate, an extension of the CLSS scheme under the PMAY for Middle Income Groups (MIG) and unlocking of more government-controlled land, then it will enable the industry to utilize the allocated funds and make the buying process more convenient.

The author is CEO, Reliance Home Finance.

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