20
By Manish ShethAffordable housing has always been focus of present government and various measures initiated underline its strong intent towards achieving that goal.
Although upcoming Budget would be a vote on account, a few positive announcements from affordable housing finance perspective can be expected.
Tax incentives for first time home buyersSection 80EE of Income Tax Act provides an additional deduction of Rs 50,000 for first time home buyers whose housing loan was sanctioned during period April 1, 2016 to March 31, 2017.
Given government’s continued impetus on housing for all, this scheme should be extended further to benefit first time buyers.
GST Incentives for home buyersSale of under construction properties attract 12 per cent GST (8 per cent for affordable homes), making purchase of a house costly for home buyers.
Exempting GST on properties falling under affordable category would be a much needed boost to sentiment of home buyers.
Additional deduction for pre-construction interestAs per Income Tax Act provision, interest on housing loan paid for period in which a house was under construction, can be claimed as a deduction in five equal installments from financial year in which home has been offered for possession.
However, practically, most taxpayers lose out on deduction on paying pre-construction interest since amount is included in overall limit of Rs 2 lakh fixed for interest on housing loan deductible in case of self-occupied property.
Reduction of stamp duty on affordable housing Stamp duty being a state subject, duty rates are vary at different locations across country.
In addition, stamp duty is calculated ad valorem on basis of price of property sold.
Therefore, government should evaluate idea of capping stamp duty rates for affordable homes.
PSLC for HFCsPriority sector lending certificates (PSLC) are tradable certificates issued against priority sector loans of banks.
PSLCs are an effective market-driven interest subsidy to institutions that originate priority sector loans.
At present, only scheduled commercial banks, urban co-operative banks, small finance banks and local area banks are allowed to issue and buy PSLCs.
Given priority sector classification on affordable housing loans, PSLC issuance should be extended to housing finance companies too.
The existing measures and efforts of government to offer affordable housing have turned out be quite beneficial for industry.
However, expanding demand spectrum further, announcements on augmentation of existing schemes or launch of a few beneficial ones will definitely spur growth in industry.
It’s time to capitalise on affordability factor.
(The writer is group CFO at JM Financial)
