Budget 2024 expectations: Naredco proposes higher home loan deduction limit, SWAMIH 2.0 and more
NAREDCO has suggested that the FM consider increasing tax exemption on interest on self-occupied property loans to ₹5 lakh from the current limit of ₹2 lakh
Real estate developers’ body the National Real Estate Development Council (NAREDCO) has suggested that the finance minister consider increasing the tax exemption on interest on self-occupied property loans to ₹5 lakh from the current limit of ₹2 lakh to augment housing demand and sought tax incentives from the government to boost supply of affordable housing stock.
It has also recommended that the government come up with the second tranche of the Special Window for Affordable and Mid-housing (SWAMIH) Fund.
NAREDCO said that under Section 24 of the Income Tax Act, the deduction allowed on interest on loans for self-occupied property is limited to ₹2 lakh. "Given the rising property prices and interest rates, NAREDCO proposes increasing this limit to at least ₹5 lakh," the association said in a statement.
Additionally, the current limit for setting off house property losses against other income heads under Section 71 is ₹2 lakh, which is seen as discouraging for the industry where rental income is a major source. NAREDCO recommends removing this limit or increasing it to ₹5 lakh, it said.
In an interview to HT.com, G Hari Babu, president, NAREDCO, said that the government should consider a 5% fixed interest rate for loans up to ₹25 lakh for the first five years. This will encourage more people to come forward and invest in affordable homes, he added.
The real estate developers’ body mentioned that currently the annual value of property held as stock-in-trade and not let out is considered nil for up to two years from the end of the financial year in which the construction completion certificate is obtained. After this period, the notional income is taxed. It suggested that this provision should not apply to real estate developers holding stock due to weak market conditions and recommended increasing the time limit from two to five years.
On input tax credit
NAREDCO also suggested that the government permit builders the option to pay GST at a concessional rate without input tax credit (ITC) or at a higher tax rate after availing of ITC. Currently, GST on affordable housing units is levied at 1% without ITC and at 5% without ITC on other residential units. The option to choose between concessional rates without ITC or higher rates with ITC would result in tax cost savings and better cash flows for developers, ultimately benefiting end customers, it said.
Definition of affordable housing
The definition of an affordable housing unit, which currently includes criteria for carpet area and a price cap, also needs revision. NAREDCO recommended retaining only the carpet area condition without the price limit. “This change would accommodate higher land prices in metro cities and extend affordable housing benefits to more projects, enabling a larger portion of the lower and middle-income population to buy homes,” it said.
"These recommendations, if implemented, will not only provide much-needed relief to developers but also stimulate demand in the housing sector. By addressing key tax and regulatory issues, we can create a more optimistic environment for both builders and homebuyers, ultimately contributing to the government's vision of Housing for All,” said G Hari Babu, president, NAREDCO.