Real estate is a critical aspect of the Nation’s economy, and the more people invest in housing, the better it is for the country’s overall growth. Considering the same, some integral aspects regarding home loans, minimum home loan interest rates, and tax deductions have become the centre of discussion in the Budget of 2023.
The fiscal year 2022-23 has been a roller-coaster ride for several homebuyers, especially those who took home loans to purchase the home of their dreams. RBI introduced multiple repo rate revisions, which led to an increase of 225 basis points to 6.25 percent.
How Budget 2023 Benefits Homebuyers
Let us look at some of the key modifications of Budget 2023 that can impact homebuyers:
End of double-tax benefits on selling the property
According to Budget 2023, when homeowners calculate capital gains on selling a residential property, the cost of acquiring the property must not include the home loan interest rate, for which the owner has already gained an income-tax rebate. This erroneously generated double tax benefits, which will now be corrected.
Home Loan Tax exemptions
As followed traditionally, the principal amount of your home loan qualifies for a tax exemption of Rs 1,50,000 under Section 80C of the Income Tax Act, 1961. Also, the interest amount of the home loan or home renovation loan qualifies for a tax exemption of Rs 2 lakh under section 24B of the Act. Other tax exemptions include Rs 50,000 under section 80EE and Rs 1,50,000 under section 80EEA. So approximately, the total tax deduction benefit till the last year was Rs. 3.50 lakh for home loan borrowers.
With Budget 2023, there will be an increase in the tax exemption amount on home loan interest from Rs. 2 Lakhs to Rs. 5 Lakh under Section 24 (b).
A Separate Annual Deduction For Home Loan Principal Repayment has also been provided
Traditionally the principal amount paid under the home loan was eligible for a tax deduction of Rs 1,50,000 under section 80C, clubbed with other investments like Life insurance premium payments, investment in Sukanya Samriddhi, ELSS, and PPF.
However, with the new budget, a separate section, solely for home loan principal amount tax rebate of Rs 1.5 lakh under section 80C, is also provided. The recent changes in the housing market, including reforms related to equitable mortgage, are poised to significantly impact the way individuals access and purchase homes. These changes aim to make homeownership more attainable and encourage greater investment in real estate through home loans.
Modification in the price band
The traditional price cap on affordable housing was Rs 45 lakh, but considering the rate of inflation and huge variance in the price of real estate in metro cities, the price band has been revised. It has been increased to Rs 85 lakh in metro cities like Mumbai, Rs 60 – 65 lakh in other major cities, and a standard 50 – 60 lakh for all other homebuyers.
Easy and User-friendly Home Loan Plans
The recent hike in repo rates has led to an increase in the minimum home loan interest rate, which eventually led to an increase in their monthly EMIs. Friendly home loan policies have been introduced to compensate for the loss that homebuyers have faced in the past and to encourage more people to go for real estate investments.
One of the key changes is to apply a single GST for all home constructors instead of different GST rates for different products so that the cost of building homes comes down. It will help people get access to affordable homes.
Reinstatement of Tax Holiday
Tax holidays for developers of affordable housing came to an end in 2021 – 22. To promote better schemes and rebates, the scheme has been reinstated.
Reinstatement of subvention schemes
This will encourage new homebuyers on home loans to pay their monthly EMIs after they possess the property rather than paying their dues as soon as the loan is active.
Revision of PMAY – Pradhan Mantri Awas Yojana allocation
It is expected that under the PMAY scheme, the Government will extend CLSS – Credit Linked Subsidy Scheme benefits to cater to the Middle Income Group segment.
Reduction of stamp duty and registration charges
State Governments in Maharashtra, UP, and West Bengal initiated this benefit in 2021, which led to a major hike in homebuyers investing in real estate. The same has been processed for the real estate sector growth at large in 2023.
The changes in Budget 2023 mentioned above will make a huge difference for home loan or home renovation loan borrowers in 2023 and will encourage more people to consider real estate as an investment option. If worked as planned, it can have a massive positive impact on the National Economy and lead to an unprecedented development of the Real Estate industry.