The Indian government will allow first-time homebuyers to enjoy a tax benefit of Rs 2.4 lakh. The individual must have a taxable income below Rs 18 lakh per year. This move will be a game changer for the housing sector.
The tax benefit amount is equal to the total interest subsidy more than a 20-year loan, which will be given up front to the housing financing company through the National Housing Bank and Hudco to reduce the outstanding loan.
If the individual takes a 15-year loan, the tax benefit amount will be Rs 2.2 lakh. The secretary said the scheme is expected to be notified shortly and will be effective from January 1, 2017.
“This is the first time we are talking about the middle-income group. We were hoping that this scheme would be a game changer,” Nandita Chatterjee, Secretary of Housing and Urban Poverty Alleviation, said at the ET Roundtable on Housing for All.
The real estate developers and housing finance executives said that this step would make projects affordable as EMI will fall and increase the eligibility of 90% of the homebuyers since the taxable income of Rs 18 lakh is on the higher side.
According to the income, homebuyers can get a subsidy at various rates under the Pradhan Mantri Awas Yojana by Prime Minister Narendra Modi. If the yearly salary is below Rs 6 lakh, then the buyer will get a subsidy of 6.5% points on the principal component, irrespective of the total loan.
In case the income is up to Rs 12 lakh, the subsidy is 4% points on the principal component of Rs 9 lakh and for income up to Rs 18 lakh, the 3% points will be on the component of Rs 12 lakh.
Sanjay Joshi from HDFC has reportedly said that home loans should cover stamp duty, which is 10% of the cost. “It will make it very easy for homebuyers to acquire property since there will have easy access to funds,” he said.
Moreover, some developers also said that the government must define a property’s carpet area that qualifies for affordable housing in many metros. The developers should not be forced to use 90% of the Floor Area Ratio (FAR).