CREDAI Recommends Increase in Exemption Limit for Housing Loans Repayment in Upcoming Budget

Leading real estate body Confederation of Real Estate Developers' Associations of India (CREDAI) shared a slew of recommendations for the upcoming Budget to unlock the full potential of the Indian Real Estate sector and revive certain segments including the Affordable Housing sector. CREDAI has been advocating for Affordable Housing and encouraging its members working towards fulfilling the aspirations of homebuyers. However, there are some fundamental concerns that CREDAI has urged the Government to address. Additionally, CREDAI has also focused on increasing limits under certain sections of the IT Act that could help in boosting overall demand for Housing and provide an additional boost to the growth of the Indian economy:

• Increasing Tax Exemptions : Currently, the ceiling of deduction for principal repayment of housing loan is INR 150,000 Further, the above deduction is clubbed with other tax saving instruments. Many are not able to claim the benefit of this deduction to the fullest considering the above limit and other available deductions under section 80C. Deduction under section 80C for principal repayment of housing loan should be increased from existing limit of INR 150,000. Alternatively, the deduction for principal repayment of housing loan can be considered for a separate or standalone exemption.
• Changing Definition of Affordable Housing: The definition of Affordable Housing, which was capped at Rs 45 lacs, was given in 2017 and is yet to change since. Due to inflation alone, there has been significant rise in real estate prices in the past 7 years. As per data from the National Housing Bank (NHB), there has been an increase of 24% in housing rates since June 2018 in India – which makes the current cap of 45 lacs extremely unfeasible for developers to adhere to. There has also been a gradual reduction in availability of units under Rs 50 lacs on account of inflationary pressure. Hence, CREDAI recommends the definition of affordable housing to be revised as “a unit with 90 square meter RERA Carpet Area in Metros Cities and 120 square meter RERA Carpet Area in Non-metros without a cap on cost of the unit”.
• Present limit for deduction of interest against “Rental income” under section 24(b) is INR 200,000 for self-occupied property. Homebuyers lose the benefit of interest claim which exceeds INR 200,000 despite actual payment of the interest. It is suggested that, in the case of individuals, the interest in respect of first self-occupied property should be allowed without any limit. Alternatively, the limit for deduction of interest should be increased to INR 5,00,000 in respect of the self-occupied property.
• There should also be a provision of Credit Guarantee scheme for i) Housing loan up to Rs 40 lac (80% - 90% of value of Affordable house as per the definition) ii) House improvement loan up to Rs 20 lacs. This will provide a boost to the home loan sales to the low-income group of the population.
• Credit Linked Subsidy Scheme: CLSS scheme for MIG-1 and MIG-2 segment is now withdrawn. The scheme may be reintroduced & extended until Dec 31, 2024. Around 2/3rd of India population is under the age of 40 years. Hence, a substantial portion of total population is on the verge of becoming the first-time home buyers. As India is celebrating “Amrit Kaal” on its 75th Independence Day, a separate booster for India’s youth population is needed to pursue their dream home purchase.
• Long Term Capital Gains: : Long term capital gains on capital assets should be taxed at 10% and the holding period should be reduced to 12 months. Capital gains on Sale of residential property should be exempted if 50% of the sale realization is invested in more than one residential property. Currently, Long Term Capital gains on capital assets are taxed at the rate of 20% and the holding period for eligibility is 24 months.

Additional incentives like reduced stamp duty, streamlined approval processes, and subsidies for developers investing in affordable housing projects would further boost the sector, promoting sustainable urban development.

"With its significant contribution to GDP, employment generation, and infrastructure development, the real estate sector needs a supportive budget that addresses long-standing challenges and paves the way for sustainable growth, especially for the affordable housing segment. CREDAI remains committed to working closely with the Government to create a conducive environment for the real estate sector and contribute to India's prosperity. Through our recommendations, we have addressed some of the key fundamental issues that we believe will provide a huge boost to both demand and supply, through a mix of increased tax exemptions and tweaks in the definition of affordable housing – which is bound to provide a definitive way forward as Indian Real Estate is projected to contribute close to 20% of India’s economy once it reaches the $10 Trillion milestone” said Mr. Boman Irani, President, CREDAI