In order to push the real estate sector after the blow it had received post demonetization and the widespread corruption on the part of the builders, the new budget announcements were expected to up the stakes in affordable housing. The pradhan mantri awas yojana was aimed at encouraging first time home buyers to invest in real estate property and also cleanse the sector of the widespread black money collection that went on for a long time. The pmay has also put focus on the middle class and made it easier than ever before for all to own a property in the country as this yojana has fast turned into the government’s proudest initiative meant for the poor and the middle class.purchase or construction of a home. The loan may also be used to improve an existing home or to prepay their existing housing loan.
Some key points to know
The Prime Minister, Shri Narendra Modi on the last day of last year announced that the rates of interest of three percent will be levied on home loans ranging up to rupees 12 lakh and four percent on loans going up to rupees 9 lakh under the pradhan mantri awas yojana. It is important to understand that the budget is likely to provide further clarity on the actual definition of the beneficiaries that are eligible to avail these benefits that could make buying a house more affordable. Those with an annual income of rupees 18 lakh will receive a subsidy of three percent on a loan going up to rupees 12 lakh.
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Reforms to be made
Real estate experts are of the opinion that it is important to increase the loan limits for major metro cities where the problem of housing and affordability is most acute. This happens as a result of a large number of migrant populations in cities providing greater scope for jobs. It is also important to revise the income beneficiaries under the PMAY scheme as also emphasis on the building of infrastructure along with a focus on integrating peripheral areas with mainstream city. This will further the cause of extending affordable housing across all cities in the country.
Tax benefits to be introduced
In speaking of the myriad pmay tax benefit, it can be said that there is a need for the income limit to be increased which will bring into the game almost ninety percent more of the first time home buyers within the scope of the pmay. It must be understood that the interest rate subsidization for housings that have to do with lower cost will serve in addressing the problems pertaining to housing needs and affordability as also provide the necessary boost to our economy. The tax benefit collected from the increased consumption of housing can contribute to the cost of interest subvention which can make for a win-win situation. These measures must be introduced in the budget in order to expect a positive impact on the country’s economy.
There is need for an increase in the prevailing exemption of interest from the existing rupees two lakh under Section 24 (b) of the Income Tax Act, 1961. In order to encourage home owners to invest more readily in real estate, it is not enough to just reduce rates of interest on loans provided by commercial banks or NBFCs, it is also necessary to increase the interest limit that can be offered to you while taking a Bajaj Finserv Home Loan. This must also accompany a reduction in the rate of income tax as part of pmay tax benefit for home buyers’ scheme. When offered in a package, this will concentrate more money on the hands of the tax payer which he may put to investment in the real estate sector.
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