The tax deduction limit on housing loans for metropolitan cities needs to...

The tax deduction limit on housing loans for metropolitan cities needs to be increased: Sarojini Ahuja, Transcon Triumph

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India Budget 2018

Budget 2017 had introduced certain measures to boost the real estate sector and achieve the target by 2022.Implementation of the Real Estate (Regulation and Development) Act, 2016 (RERA) with effect from May 1, 2017, was another major step toward this end.
The real estate sector is still reeling under the burden of RERA and a general slowdown in economic activity. We believe the government will announce incentives, especially in the affordable housing category in order to ease the burden on real estate. To further promote affordable housing, the following tax reforms could be considered in the forthcoming Budget 2018.

  1. Housing loss set-off limit of Rs.2 lakhs should be increased
    The tax deduction limit for housing loans, especially for buyers in metropolitan cities, needs to be increased as the current limit of Rs 2 lakh is insignificant given the ticket sizes in cities, especially in bigger metros like Mumbai, where an overwhelming majority of the available housing is priced at, or above, Rs 1 crore.
    Since a housing loan could run for 20 -25 years, it is unlikely that there will be sufficient rental income in next 8 years to absorb the interest of that particular year as well as the loss brought forward. In that case, the loss will lapse after 8 years.
  2. Bigger tax incentive for first-time home buyers
    The first time home buyer benefit of Rs 50,000 tax exemption benefited end-users in tier-II, III cities but not as many in the bigger metros where housing is largely above this specific limit.
  3. Reduction in GST rates
    While the GST (goods and services tax) structure was announced last year, the real estate industry was badly hit with the increase in the effective net tax payout against real estate purchase. The industry is waiting with bated breath to see a reduction in the tax rate is applied to the real estate and construction industry.

Mr. Sarojini Ahuja is the Vice Presdient, Sales & Marketing of Transcon Triumph.