Newsdetail

Budget 2023 NAREDCO seeks hike in deduction on home loan interest

By Rishabh Chamoli | 2023-01-17

While previous years budget could not meet industrys expectations, realty experts are hopeful that the upcoming Budget 2023 will entail some encouraging steps for the sector. The National Real Estate Development Council (NAREDCO) has put forth several demands to the Central Government, anticipating them to be a part of the upcoming Budget.

The continuous increase in repo rate has not gone down well with homebuyers. From April 2022 to December 2022, the Reserve Bank of India (RBI) has increased the repo rate by 225 basis points to make peace with the increasing inflation. This hike has impacted the real estate industry and discouraged many buyers. Therefore, the government must introduce some constructive reforms and policies that can relieve homebuyers from financial burden and encourage them to invest in real estate.

Hike in home loan interest deduction limit
The National Real Estate Development Council (NAREDCO) has urged the Central Government to raise the deduction on the interest component of home loans under Section 24 of the Income Tax Act, 1961, to Rs 5 lakh from Rs 2 lakh at present. If accepted, it would provide a fillip to the countrys residential real estate sector, which has been going through difficulties since the past few years.

Introduction of subvention schemes
NAREDCO has also asked for the re introduction of subvention schemes where real estate developers pay home loan interest on behalf of home buyers for a specific period. These schemes were banned in 2019. Also, it proposed incentives for rental housing with an enhanced exemption for House Rent Allowance and a deduction of 30 percent from the annual rental income for purposes of maintenance should be hiked to 50 percent. More stress funds to aid the completion of stalled and distressed projects is also a crucial expectation that should not be sidelined.

Extension of Credit Linked Subsidy Scheme (CLSS)
The autonomous body has also demanded infrastructure status for the real estate sector to enhance its borrowing capacity. This is in addition to the Credit Linked Subsidy Scheme (CLSS) extension for all segments and reduction in the holding period of house property to up to 12 months from the existing 24 months to qualify as a long term capital asset.

Overall, with continuous increase in home loan interest rates and housing prices, the real estate sector requires remedial measures. If Government considers these suggestions, it will significantly boost cash inflows in the sector and the holistic realty growth.