Have you been scouting for an apartment of late? If the answer is yes, then now may be the right time to enter the property market. If one is to believe market indicators, favourable price points and high inventory of unsold units make it a buyer-friendly market. As the COVID-19 pandemic has hit the sector hard, the presence of large inventory across key cities of the country has increased the troubles of the sector. In such a scenario, several factors favour homebuyers. The upcoming Union Budget 2022-23 is one of the reasons that homebuyers can expect to have more money to make a purchase decision.
Also listen: Here's What Homebuyers Can Expect From Budget 2022
What should you expect?
Homebuyers can expect more purchasing power this year. As the real estate sector is going through a rough phase, the government has been bringing in structural reforms and incentives to aid the sector and support the development firms. Under the current circumstances, the government is already promoting homeownership. And subsequent lockdowns have given us enough reasons to buy spacious homes.
To boost the overall homebuying sentiment, especially in these difficult times, Finance Minister Nirmala Sitharaman may increase the interest deduction for homebuyers for tax rebate under section 24(B) in her Union Budget. Under the section, the limit on the deduction for interest payment for let out as well as self-occupied properties is Rs 2 lakh. Further, if construction is not completed within five years from the end of the financial year in which capital was borrowed, then the limit is Rs 30,000 only. The limit will likely be increased to Rs 5 lakh. It would give more interest deduction.
Moreover, first-time homebuyers were made entitled to an additional rebate of Rs 1.5 lakh over and above section 24 (B), on the interest component under section 80EEA. This provision was introduced in Union Budget 2019 for affordable homes and comes laden with many conditions. First, the loan should have been sanctioned by a bank, banking company or housing finance company between 1 April 2019 and 31 March 2022, the stamp duty value of the property should not exceed ₹45 lakh and the homebuyer should not own any residential house property on the date of sanction of loan. The government would likely extend the date, as it has done in the past.
In addition to the above, with an aim of providing ‘Housing for All’, the beneficiaries under the Pradhan Mantri Awas Yojana – Credit Linked Subsidy (EWS /LIG) Scheme would be eligible for a subsidy of up to Rs2.67 lakh on their home loan. Under CLSS – MIG, max subsidy for MIG1 – is Rs 2,35,068 and maximum subsidy for MIG2 – is Rs 2,30,156. Hence, if someone is taking a loan of Rs 10 lakh, the amount repayable for the MIG2 category would be ₹7,69,844.
Hence, first-time homebuyers will have some good savings if they invest now.
Also read: Budget 2022: Will the Union Budget address homebuyers’ job insecurity issues?
Do price points favour homebuyers?
The real estate market is already witnessing a slump. As a result of the glut, the prices have remained under check for the past two years or more. In some markets, the rates have corrected to 2013-14 levels. Greater Noida West in the NCR is one such example of an oversupplied market, where ready-to-move-in apartments are selling at price points witnessed in 2013-14.
Compared to the ready properties, new launches are coming at lower rates in some markets. It means that development firms are already under pressure to sell. Further, for homebuyers, it means that they can bargain for heavy discounts while purchasing from a developer.
Will affordability increase?
Yes, as a result of the possible measures, the country will be able to increase the supply of affordable housing in the country. Development firms have been demanding a slew of measures to make the housing segments more attractive for homebuyers. One such demand is to include all housing under the ambit of affordable housing.
The scope of affordable housing projects receiving 100% deduction of the profits and gains derived from the business of development and building housing projects u/s 80 IBA of Income Tax, 1961-2018 should be increased, developers have proposed. And there has been a change in provisions of this section with effect from September 1, 2019. Housing projects are approved between 01.06.2016 to 31.03.2022. Hence, developers have demanded to amend Section 80IBA (2)(a) to provide the benefit to all the projects registered with RERA between June 1, 2015, and March 31, 2023. Moreover, developers have demanded that to promote affordable housing, the deduction should be extended to all projects registered with RERA, provided they meet other requirements.
Currently, under section 24(b), interest on borrowed capital to acquire a house for rental purposes is allowed in full. However, in the case of self-occupied houses, interest is restricted to Rs 2 lakh. According to the developers, this limit is too low and should be increased to at least Rs 5 lakh to promote house purchase.
What does this mean?
If the government increases the scope of the definition to include all other kinds of housing, developers will then be able to reduce the rates further. That said, it is only one of the recommendations from the real estate sector. Hence, do not bank your purchase decision merely on this. Go for real gains. Hopefully, the tide will turn in favour of homebuyers this year!