Budget 2019 Time to Maximise Affordability to Boost Housing Demand

Budget 2019: Time to Maximise Affordability to Boost Housing Demand

Affordable housing as always been the focus of the present government and various measures initiated underline its strong intent towards achieving that goal.

Although the upcoming Budget would be a vote on account, a few positive announcements from the affordable housing finance perspective can be expected.

Tax incentives for the first time home buyers

Section 80EE of the Income Tax Act provides an additional deduction of Rs 50,000 for the first time home buyers whose housing loan was sanctioned during the period April 1, 2016 to March 31, 2017. Given the governmen’s continued impetus on housing for all, this scheme should be extended further to benefit the first time buyers.

GST Incentives for home buyers

Sale of under construction properties attract 12 per cent GST (8 per cent for affordable homes), making the purchase of a house costly for the home buyers.

Exempting GST on properties falling under affordable category would be a much needed boost to the sentiment of the home buyers.

Additional deduction for pre-construction interest

As per the Income Tax Act provision, the interest on housing loan paid for the period in which a house was under construction, can be claimed as a deduction in five equal installments from the financial year in which the home has been offered for possession. However, practically, most taxpayers lose out on the deduction on paying pre-construction interest since the amount is included in the overall limit of Rs 2 lakh fixed for the interest on housing loan deductible in case of self-occupied property.

Reduction of stamp duty on affordable housing

Stamp duty being a state subject, the duty rates are vary at different locations across the country. In addition, stamp duty is calculated ad valorem on the basis of the price of the property sold. Therefore, the government should evaluate the idea of capping the stamp duty rates for affordable homes.


Priority sector lending certificates (PSLC) are tradable certificates issued against priority sector loans of banks. PSLCs are an effective market-driven interest subsidy to the institutions that originate priority sector loans.

At present, only scheduled commercial banks, urban co-operative banks, small finance banks and local area banks are allowed to issue and buy PSLCs. Given the priority sector classification on affordable housing loans, PSLC issuance should be extended to housing finance companies too.

The existing measures and efforts of the government to offer affordable housing have turned out be quite beneficial for the industry. However, expanding the demand spectrum further, announcements on augmentation of the existing schemes or the launch of a few beneficial ones will definitely spur growth in the industry. It’s time to capitalise on the affordability factor.

Source : EconomicTimes

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