The minister also proposed providing capital gains exemption from profits earned by selling residential houses by investing in start-ups.
Pune: In a bid to provide “Housing for All by 2022”, the government announced major tax benefits in the Budget to help stimulate demand for the affordable housing segment, that is expected to attract first-time homebuyers in the country.
Interest deduction up to Rs 3.5 lakhs for affordable housing priced upto Rs 45 lakhs, as against Rs 2 lakhs earlier, will now be available until March 31, 2020.
“For realising the goal of Housing for All and affordable housing, a tax holiday has already been provided on the profits earned by developers of affordable housing. Also, interest paid on housing loans is allowed as a deduction to the extent of Rs 2 lakhs in respect of self-occupied property. In order to provide a further impetus, I propose to allow an additional deduction of up to Rs 1,50,000 for interest paid on loans borrowed up to March 31, 2020 for purchase of an affordable house valued upto Rs 45 lakhs. Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to Rs 3.5 lakhs. This will translate into a benefit of around Rs 7 lakhs to middle class home-buyers over their loan period of 15 years,” finance minister Nirmala Sitharaman said.
As many as 1.95 crore houses are proposed to be provided to eligible beneficiaries under PMAY-Grameen, while another 19.5 million houses are to be built under PMAY-Urban between 2020 and 2022.
The minister also proposed providing capital gains exemption from profits earned by selling residential houses by investing in start-ups. This would be permitted only up to March 31, 2021.
Ms Sitharaman also noted that the completion of houses that previously required 314 days per house in 2015-16 had come down to 114 days since 2017.
Under Pradhan Mantri Awas Yojana — Urban (PMAY-Urban), over 81 lakh houses with an investment of about Rs 4.83 lakh crores have been sanctioned, of which construction has started in about 47 lakh houses.
Also, over 26 lakh houses have been completed of which nearly 24 lakh houses have been delivered to the beneficiaries.
There is large-scale adoption of new technologies for construction of these houses, the minister noted, adding that over 13 lakh houses have so far been constructed using these new technologies.
“The affordable housing segment has received the much needed fillip. Moreover, unavailability of land or high cost of land has been a hindrance to affordable housing projects, which the government has proposed to make land parcel from public entities for such projects, a positive step,” J.C. Sharma, vice-chairman and managing director at Sobha, a listed firm, said.
He said aligning the definition of affordable housing in the Income-Tax Act with the GST Acts, the government has proposed to increase the limit of carpet area from 30 square meters to 60 square meters in metropolitan regions and from 60 square meters to 90 square meters in non-metropolitan regions.
“Increasing carpet area was an important demand of the sector, which has been addressed appropriately,” Mr Sharma said.