First-time home builders whose borrowing does not exceed Rs.25 lakh are set to reap the benefit from the Union Budget proposals. A look by Balaji Rao

Forget about buying SUVs or eating out at AC restaurants which the middle class can live without; Union Finance Minister P. Chidambaram has brought the middle class home loan borrowers into his tax sops ambit and given them something to cheer about. He has ensured that the middle class will, after all, have the courage to own a house and, importantly, have a little more left to invest or spend.

Whatever may be the positive/negative perceptions of the experts about the Union Budget presented by Mr. Chidambaram on behalf of the UPA Government, there are a few notable takeaways for the housing sector, including tax sops for first-time home loan borrowers.

The erstwhile tax exemption of up to Rs.1.50 lakh under Sec. 24 on the interest component has been increased to Rs.2.50 lakh. Though the full clarification is awaited, it is evident that the first time borrowers whose borrowing does not exceed Rs.25 lakh are set to reap the benefit.

It would mean that the exemption on the principal component of the home loan will remain to be Rs.1 lakh while the exemption on the interest component will get raised to Rs.2.50 lakh, thereby giving thousands of middle class borrowers an additional tax benefit of Rs.1 lakh from the FY 2013-14.

This would mean that these borrowers will have additional funds on hand for investment or lifestyle-related spending.

Further, the Finance Minister has allowed carrying forward of the additional tax deduction to the subsequent financial year by the first-time home loan borrowers.

These announcements are perceived to offer tremendous impetus for the housing sector as also to the housing loan companies, banks and housing finance institutions.

The Budget also has given a boost to infrastructure that includes the housing sector. Additionally a fund worth Rs.2,000 crore has been allocated under urban housing (to be set up by NHB), much needed now. For some not-so-good news, for all apartments/houses that are of an area exceeding 2,000 sq.ft with a financial consideration of above Rs.1 crore, the service tax has been increased from 25 per cent to 30 per cent. This could affect the high-end customers.

However, the full impact and implications of the sops and announcements will have to be dissected in detail to check the actual benefits for the common man, which would be done in due course.

Overall the Budget has been moderate and the FM has tried his best to balance it, trying to push growth at one end of the spectrum and please the voters at the other end and ensure they go into the elections next year with confidence.

Tax exemption on the principal component of the home loan will remain at Rs.1 lakh while the exemption on the interest component will go up to Rs.2.50 lakh, thereby giving thousands of middle-class borrowers an additional tax benefit of Rs.1 lakh


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  • Borrowers will have additional funds for investments or lifestyle-related spending.



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  • The Finance Minister has allowed carrying forward of the additional tax deduction to the subsequent financial year by first-time home loan borrowers.




  • Service tax up for houses exceeding 2,000 sq. ft