Increased tax deductions for interest paid on loans for houses up to ₹45 lakh, construction of 1.95 crore rural houses and finalisation of a model tenancy law were among the proposals for the housing sector in Finance Minister Nirmala Sitharaman’s Budget speech on Friday.
“For realisation of 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 ₹2 lakh in respect of self-occupied property,” she said.
In order to “provide a further impetus”, she proposed an additional deduction up to ₹1.5 lakh for interest paid on loans borrowed up to March 31, 2020 for buying “an affordable house valued up to ₹45 lakh”.
“Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to ₹3.5 lakh. This will translate into a benefit of around ₹7 lakh to the middle class home-buyers over their loan period of 15 years,” she said.
Speaking about what she called the “archaic” rental laws that “do not address the relationship between the lessor and the lessee realistically and fairly”, she said a model tenancy law would be finalised and circulated to the States.
On construction of affordable housing in the country, the Minister said 1.54 crore rural homes had been completed under the Pradhan Mantri Awas Yojana-Gramin in the past five years and 26 lakh houses under PMAY-Urban. “In the second phase of PMAY-G, during 2019-2020 to 2021-2022, 1.95 crore houses are proposed to be provided to the eligible beneficiaries. These houses are also being provided with amenities like toilets, electricity and LPG connections,” she said.
The time taken to complete a house, she said, had been reduced from 314 days in 2015-16 to 114 days in 2017-18 using technology and the direct benefits transfer platform. The Budget, however, reduced the total allocation for PMAY (both rural and urban) from last year. It went down from ₹31,164 crore in 2017-2018 to ₹27,505 crore in 2018-2019 Budget estimates to ₹26,405 crore in 2018-2019 revised estimates to ₹25,853 crore for 2019-2020 Budget estimates.