Authority demands reduction of interest rate on home loans.

The real estate industry has urged the government to lower the interest rate on home loans to 7% and to raise the deduction of income tax on interest paid on housing loans to Rs 5 lakh to help revive demand after home sales rose by just 1% in 2019.

The industry body National Real Estate Development Council (Naredco) has asked the government to redefine affordable housing and expand tax benefits to larger houses that cost more than Rs 45 lakh by proposing its wish list for the forthcoming Union Budget.

The Ministry of Finance and Housing was represented in this regard. Developers said that a rebound in the housing industry will also be contributing to restoring the growth momentum of the overall economy.

Niranjan Hiranandani, national president of Naredco, added: “The fiscal incentive for the real estate sector will have a broad effect on 269 multi-dimensional alliances in boosting GDP growth inclusive of job creation”. In this 2020 budget, the Indian real estate sector is seeking a comprehensive, not a fragmented solution.

Naredco stated that the industry is faced with grave liquidity crunch challenges and that bold fiscal measures would be taken to revitalize the reeling industry.

Hiranandani said, “Home loan interest rates will be reduced to 7% pa and customers must get benefit from the rate reduction to resurrect demand”.

In order to boost sales, the industry recommended tax changes and the deduction on home loan interest to Rs 5 lakh from Rs 2 lakh to boost sales.

Naredco also called for the redefinition of “affordable housing”, since all the houses in the Mumbai Metropolitan Region (MMR) and most homes in the National Capital Region (NCR) and the other metros are not protected by the current concepts.

As specified in GST and income tax laws, houses are required to satisfy the two criteria of no more than 60 square meters of carpet area and a price cap of Rs 45 lakh in order to benefit from a reduced 1% rate of GST for affordable housing and a tax exemption for such projects.

“We suggest immediate abolition of the Rs 45 lakh price cap and the benefits are restored to all the houses which have an area less than 60/90 square metres,” said Hiranandani.

According to the Annual Report of real estate consultants Knight Frank, housing sales in the country’s top eight cities saw a marginal 1% annual growth in sales volumes in 2019. In 2019, the total sales volume increased to 245,861 units compared to 242,328 in 2018, and developers were aligned by reducing ticket sizes and unit sizes with the needs of homebuyers.