Homebuyers on February 1 welcomed the government's move to increase the tax rebate limit under the new tax regime, but said Budget 2023 was silent on high home loan rates, pending registries, and the tax rebate on housing loans, among other misses.
Crushing disappointment
Abhishek Kumar, president, Noida Extension Flat Owners Welfare Association (NEFOWA), said budget 2023-24 was “disappointing” for homebuyers.
“Skyrocketing inflation and rising EMIs are troubling the people. There is no relief from higher home loan rates. There is definitely some relief in the tax slab but it is not enough. People are paying interest to the banks and taxes to the government but their problems are not ending,” Kumar told moneycontrol.
“In such a situation, all the homebuyers seem to be in despair once again. There does not appear to be any serious provision in the budget to provide relief to the homebuyers who have lost their earnings of years.”
He also said that no “meaningful effort” is visible to start work on incomplete projects in the National Capital Region.
New tax regime only benefits low-income groups
Chitra Gopalaswamy, a former corporate banker and homebuyer in Bengaluru, said that under the old tax regime, one could claim an income tax deduction of up to Rs 1.50 lakhs on repayment of housing loans (principal + interest) under Sec 80C but shifting to the new tax regime, this incentive is not available anymore.
Also, it is unclear if homebuyers can save enough money in the new tax regime to buy a house, amid rising interest rates, she said.
“In India, we consider real estate an asset. However, people will buy it if there is affordability. However, to ensure people spend on real estate, the RBI must reduce interest rates,”Gopalaswamy added.
“Everyone was looking forward to an increase in the exemption on housing loans. However, as the government’s emphasis is to encourage citizens to shift to the new tax regime, I presume, no additional incentives have been announced. The increase in interest rates on housing loans could be a dampener for the real estate industry, which is yet to recover fully.”
Finance Minister Nirmala Sitharaman on Wednesday raised the personal income tax rebate limit, doled out sops on small savings and announced one of the biggest hikes in capital spending in the past decade as she did a tightrope walk in the Budget between staying fiscally prudent and meeting public expectations in the year before general elections.
The personal income tax rebate limit has been increased to Rs 7 lakh from April 1 under the new tax regime, from the previous Rs 5 lakh limit.
Experts suggest that the old tax regime is more beneficial to a homebuyer still claiming housing loan benefits and HRA options among other benefits.
“In the new tax regime, they have increased tax benefits. However, by increasing the rebate, the government is asking people to move to the new tax regime,” said Saroja Hegde, a chartered accountant based in Bengaluru. “If they want to make it a default scheme, they will have to come up with new investment plans and schemes. However, the new regime will be beneficial for low-income groups, like fresh graduates, who will not have to pay income tax.”
Increase in PMAY outlay of no use
A homebuyer, Viraj Mamania, said that though the government has increased the outlay of PMAY by 66 percent by allocating Rs 79,000 crore for affordable housing, this will not help the majority of those who want to buy a house in a city like Mumbai.
“The definition of affordable housing is below Rs 50 lakh. And the benefit of only 1 percent GST instead of 5 percent while purchasing a house is available only on houses below the Rs 50 lakh limit. However, in a city like Mumbai, there is nothing in Rs 50 lakh. The government should have considered increasing the affordability limit of extending the 4 percent GST waiver to homebuyers in Mumbai purchasing homes under Rs 1 crore,” Mamania said.
Missed opportunity
Rajiva Singh, president, Noida Federation of Apartment Owners Associations (NOFAA) said that homebuyers have been facing challenges of incomplete projects, possession and registration of apartments for almost over a decade now and this budget does not address these concerns.
“Buying apartments and homes has been getting more expensive every passing year, and this budget did not seem to give much relief to homebuyers. The least that was expected from the budget was some direct relief for homebuyers, which unfortunately is not seen in the current budget,” said Singh. “Some benefits were also expected for first-time homebuyers. First-time homebuyers had benefits for loans availed before March 31, 2022 and that should have been continued.”
He added that the budget should have considered separate tax benefits for purchase of a second apartment.
Nagesh Burla, a homebuyer in Mumbai, said that rationalisation of personal income tax slabs is a welcome sign but not much has been done on the housing front for the middle class.
RERA untouched
Dhananjaya Padmanabhachar, a homebuyer in Karnataka, said homebuyers expected the Centre to announce programmes to strengthen RERA, address housing sector irregularities, and bring a Housing Co-Operative Societies programme across India in the Budget 2023.
“The government announced a few programmes for dairy and other co-operative societies but totally forgot housing co-operative societies, which are significantly growing across India in Tier-1 and Tier-2 cities,” said Padmanabhachar. “This will become highly challenging in states like Karnataka, where homebuyers are suffering due to RERA implementation failures and with no rules framed by the state government for housing co-operative societies,” he said.
(With inputs from Souptik Datta, Mehul Thakkar and Ashish Mishra)
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