The real estate sector is looking to the India Union Budget 2020 with great expectations in a bid to get some relief from liquidity woes. Homebuyers, meanwhile, are also hoping for announcements that would ease their hardship. In 2017, real estate contributed to 6 to 7 percent to India's Gross Domestic Product (GDP). The sector is expected to contribute to around 13 percent to the country's GDP by 2025 and is seen becoming the third-largest globally at USD 1 trillion by 2030.
Below are some of the big expectations from the real estate sector from upcoming Budget. It is keen to see several sops being handed out by Finance Minister Nirmala Sitharaman to revive homebuyer interest in the sector. The following is the wish list.
Changes in Section 80C deductions: The principal repaid on a home loan is allowed as a tax deduction under Section 80C. Home-loan borrowers are expecting a relief to claim a higher deduction on the home-loan principal repayments. Moreover, the limit of tax deduction applicable on home-loan interest paid under Section 24 should increase. Currently, the limit is up to INR2 lakh, the realty sector expects the limit to be increased to INR2.5 lakh or INR3 lakh. This could result in healthier demand for housing, especially in the affordable and mid-segment categories.
Changes in Section 80EE deductions: tax deduction under Section 80EE of the Income-tax Act 1961, can be claimed by first-time home buyers for the amount they pay as interest on home loans. The maximum deduction that can be claimed under this section is INR50,000 during a financial year. The amount can be claimed over and beyond the deduction of Section 24 and Section 80C, which are INR 2,00,000 and INR 1,50,000, respectively. The expectation is that the value of the house on which the interest is paid should be increased from the current INR50 lakh to INR75 lakh or INR1 crore. The deduction under 80EE should subsequently be increased to INR1 lakh, which was previously allowed in FY 2013-14 to improve buyer sentiment.
(A version of this article appeared in the Moneycontrol on Jan 23, 2020)