Real estate got a shot in the arm from finance minister P. Chidambaram in the budget for the next financial year, but it was mostly limited to affordable housing. He proposed a Rs.2.5 lakh deduction on the total taxable income on home loans less than Rs.25 lakh.
The deduction is applicable on loans from banks and non-banking financial companies (NBFCs). Currently, the deduction on interest payment of home loans is Rs.1 lakh, irrespective of the amount. With this proposal, a Rs.25 lakh home loan will get a total tax deduction of Rs.2.5 lakh on interest payments.
Property analysts tracking the real estate sector said that this would offer a welcome impetus to budget housing, first-time home buyers and to some extent, boost demand in smaller cities and the distant suburbs in metros.
Boman Rustom Irani, chairman and managing director of Rustomjee Group, said the two disappointments for the sector in the budget are that the real estate regulator, aimed at ensuring transparency, wasn’t announced and the sector hasn’t been given infrastructure status.
Read more: Budget’s real estate sops aimed mostly at affordable housing