The real estate industry has urged the government to reduce interest rate on home loans to 7% and increase income-tax deduction for interest paid on housing loan to Rs 5 lakh to help revive demand after home sales grew just 1% in 2019.
Presenting its wish list for the upcoming Union budget, industry body National Real Estate Development Council (Naredco) has also asked the government to redefine affordable housing to extend tax benefits to bigger houses that cost more than Rs 45 lakh.
A representation in this regard has been given to the Finance and Housing ministry.
Developers pointed out that a revival in housing industry will also help the overall economy regain its growth momentum.
“Fiscal stimulus to the real estate sector will have a manifold effect on 269 allied industries with multi-dimensional impact on enhancing the GDP growth inclusive of employment creation,” said Niranjan Hiranandani, national president of Naredco. “In this Budget 2020, Indian real estate sector expects a holistic solution rather than piecemeal solutions that have been offered so far.”
Naredco said the industry is facing serious challenges related to liquidity crunch, and it would take bold fiscal measures to resurrect the reeling industry.
“Interest rates on home loans shall be reduced to 7% pa (per annum) and the benefit of rate cut should transmit to end users in order to revive the demand,” Hiranandani said.
The industry suggested tax reforms and raising deduction on home loan interest to Rs 5 lakh from Rs 2 lakh to boost sales.
Naredco also called for redefining ‘affordable housing’ because almost all the houses available in Mumbai Metropolitan Region (MMR) most houses in National Capital Region (NCR) and other metros do not fit the existing definition.
As per GST and income-tax laws, a house has to meet the dual condition of not exceeding 60 square metres of carpet area and a price cap of Rs 45 lakh to avail of reduced GST rate of 1% for affordable housing and also the benefit of tax exemption for such projects.
“We recommend that the condition related to price cap of Rs 45 lakh be immediately abolished and the benefits be restored to all the houses which have area less than 60/90 square metres,” Hiranandani said.
Housing sales in top eight cities of the country recorded a marginal 1% growth year on year in sales volume in 2019, according to real estate consultants Knight Frank’s annual report. Total sales volume was recorded at 245,861 units in 2019 against 242,328 units in 2018 as affordability improved, and developers aligned themselves with the needs of homebuyers by reducing ticket sizes and unit sizes.