Middle class income tax payers have been left disappointed again, as Finance Minister Nirmala Sitharaman, on February 1, 2022, decided not to address the demands for changes in income tax slabs to offer more savings in the hands of individuals, while presenting the Budget 2022.

While the FM decided not to extend any tax breaks for the real estate sector in her Budget, Sitharaman also announced that there would be no changes in the existing income tax slabs despite the demand from various quarters to make a tweak and increase the basic exemption limit from Rs 2.50 lakh to Rs 3 lakh.

“In a Budget that aspired to boost private consumption and create jobs to improve the economy in the backdrop of the third wave of the Coronavirus pandemic, a variety of measures have been announced by the FM that would go a long way in meeting the twin targets. However, the industry did expect some tweaks in tax slab, a move that would have resulted in greater savings for people, which would have consequently boosted consumption, especially in the real estate sector. The Budget has also been largely mute on any direct support for the housing sector,” said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com.

The FM, however, made announcements pertaining to the PM’s pet project, the PMAY.

"In 2022-23, 80 lakh houses will be completed for the identified eligible beneficiaries of the PM Awas Yojana, both rural and urban. Rs 48,000 crore is allocated for this purpose. The central government will work with states for reduction of time required for all land and construction-related approvals, for promoting affordable housing for the middle class and the economically weaker sections in urban areas. We shall also work with the financial sector regulators to expand access to capital along with reduction in cost of intermediation," she said in her Budget speech.

“Policy measures like land record digitization, allocation of Rs 48,000 crore under the PM housing schemes, completion of 8 million homes by FY 2023 and replacement of SEZ laws are expected to act as catalysts for the real estate sector. In addition to this, infrastructure status to data centres, digital connectivity and 5G spectrum allocation will further give a boost to the sector,” said Radha Dhir, CEO and country head, India, JLL.

In a Budget that provides the blueprint for next 25 years, the focus was largely on the expansion and upgrade of physical and digital infrastructure, a key priority area for the prime minister Narendra Modi led government.

Key highlights from Budget 2022

Formulation of Master Plan for expressways

Completing 25,000 kms of national highways in 2022-23

400 new-generation Vande Bharat Trains

PM Awas Yojana: 80 lakh houses to be completed in 2022-23

Har Ghar Nal Se Jal: 3.8 crore households to be covered in 2022-23

Unique Land Parcel Identification Number for IT-based management of land records

Introduction of digital rupee by RBI starting 2022-23

Facility for taxpayers to file updated return within 2 years, for correcting errors

Increase in tax deduction limit on employer’s contribution to NPS account of state government employees

***

Affordable Housing, First-Time Homebuyers Gain, In Budget 2021

Finance Minister (FM) Nirmala Sitharaman, on February 1, 2021, extended the twin measures envisaged to provide an impetus to India’s affordable housing sector, while presenting the Union Budget 2021-22.

The FM extended the scope of Section 80EEA for another year, while also announcing the extension of tax holiday for developers of affordable housing for the same period.

This means, first-time homebuyers, who purchase properties worth up to Rs 45 lakhs, will be eligible to claim additional tax deductions of Rs 1.50 lakhs every year, over and above the Rs 2 lakh rebate they can claim under Section 24. Launched in 2019, the scope of Section 80EEA was extended in the previous Budget 2020, to March 31, 2021 and has now been further extended to March 31, 2022.

Similarly, developers of affordable housing projects will be able to claim 100 per cent tax deduction on profits from affordable housing projects, till March 31, 2022, after the announcement.  

“In the July 2019 Budget, I provided an additional deduction of interest amounting to Rs 1.5 lakhs for loan taken to purchase an affordable house. I propose to extend the eligibility of this deduction by one more year, to March 31, 2022. The additional deduction of Rs 1.5 lakhs shall, therefore, be available for loans taken up till March 31, 2022, for the purchase of an affordable house,” Sitharaman said during her two-hour-long Budget speech.

"Affordable housing is set to get a boost from the extension of the tax holiday and Section 80EEA till March 31, 2022. Looking at the experience of people in the last one year, affordable housing will get more buyers, as people want to secure their lives by owning a home. The demand for affordable housing is at an all-time high," said Pradeep Aggarwal, founder and chairman, Signature Global, and chairman, National Council on Affordable Housing, Assocham.

"There has also been a prioritisation of affordable housing segment in the Budget, mainly due to the one-year extension in tax holiday for developers of affordable housing projects, along with the additional exemption of Rs 1.5 lakhs for affordable homebuyers till March 2022," added Amit Modi, director, ABA Corp, and president-elect, CREDAI-Western UP.

***

Budget 2019: FM Offers Affordable Home Buyers Higher Tax Breaks On Home Loan Interest

If the country’s banking regulator set the tone for better days ahead for homebuyers by lowering the interest rates to a record low of 5.75 per cent in June 2019, the Union Budget 2019-20 has gone a step further ahead in that direction. Presenting her maiden budget in the capacity of the finance minister (FM) on July 5, Nirmala Sitharaman announced that homebuyers would be offered additional tax deductions on the home loan interest component.  

Currently, the interest paid on housing loans is allowed a deduction to the extent of Rs 2 lakhs under Section 24 of the Income-Tax Act, if the property is self-occupied. In this budget, this limit has been extended to Rs 3.5 lakhs with an aim to boost affordable housing. It is worth mentioning here that the government conferred industry status to the affordable housing segment in its 2018 budget. Earlier this year, rates under the GST regime were also lowered to give an impetus at a time when the government is making every effort to be able to meet its Housing-For-All-by-2022 target.  

Also read: Budget 2019-20: Key Highlights

“In order to provide a further impetus, I propose to allow an additional deduction of up to Rs 1.5 lakhs for the interest paid on loans borrowed up to March 31, 2020, for purchase of an affordable house valued up to Rs 45 lakhs. Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to Rs 3.5 lakhs,” the FM said during her over two-hour-long budget speech. “This will translate into a benefit of around Rs 7 lakhs to the middle-class home-buyers over their loan repayment period of 15 years," the FM, who is the first woman to present the Union Budget in the capacity of a full-time FM, added.  

Initiatives such as this which can boost demand among home buyers, can possibly help clear unused inventory. Data available with PropTiger.com show home sales have yet to see an increase in India’s top real estate markets despite the fact that rates have largely remained stable in these markets in the past five years. Due to low sales volumes, developers are also struggling to sell huge inventory stock lying with them currently. In the national capital region alone, developers are sitting on an unsold inventory stock of 133,889 units, data available with PropTiger.com show.  

Surendra Hiranandani, founder and director, House of Hiranandani, explains that “Among the notable announcements for the real estate sector is the announcement of additional Rs 1.5 lakhs deduction in income tax on home loans, thereby, increasing the deduction limit to Rs 3.5 lakhs for affordable housing. This will drive the much-needed urgency in sales and bring the fence-sitters back into the market soon," he adds. 

"Since affordable housing is the need of the hour in our country, the additional deduction in interest paid on home loans will be favourable for homebuyers. This, in turn, will benefit developers like us who have invested in this segment. The budget is going to bring the much-needed buoyancy to the currently sluggish real estate sector,” states Jose’ Braganza, joint MD, B&F Ventures.