It seems that the Union Budget report of 2014-15 has sprung a pleasant surprise on home loan borrowers, by hiking the deduction on home loan interest under Section 24 from Rs 1, 50, 000 to Rs 2, 00,000. This will enable purchasers to save an additional amount of almost Rs 15,450 from their tax liability. Enhancement of Section 80C’s limit is also positive for those, paying large EMIs but are still not getting full tax benefits on the repayment.
The hike is also expected to lower the interest rates for home loans. So in case someone is planning to take a housing loan of about Rs 25,00,000 at a 10% rate of interest, for a period of 20 years, the EMI will be around Rs 24,125, which adds up to almost Rs 2, 89,500 annually. Also Post-Budget, the buyers can avail a deduction of about Rs 2,00,000 from their taxable income. This will enable the buyers to save around Rs 61,800 from tax liability but only if their income comes in the tax bracket of 30.9%.
Experts believe that buyers in big metros like Delhi, Mumbai and Bangalore, where most flats cost more than Rs. 1 Crore, would not be affected by this reform. However, this will be an incremental difference in case of homes within the price range of Rs. 25 lakh to Rs. 50 lakh, which may or may not be located in the metropolitan cities.
It is said that the benefit of this hike will be more in case of the salaried class, compared to the rest to some extent. Flat buyers in case smaller cities where prices are expected to be comparatively lower are expected to fee the real difference of the hike.
Many property experts also believe that the current relaxation existent in the FDI norms for real estate are also expected to open up a new stream of cheaper money for developers, with the tax hike. They also say that the tax pass through status for Real Estate Investment Trusts (REITs) to avoid double taxation will bring in more investments into the property development sector.