Budget 2020: Will government hike Rs 2 lakh tax rebate on housing loan?

Budget 2020: There is only a day left for Budget 2020 presentation and one of the biggest demands this year is for more income tax benefits. While an increase in limit under Section 80C of the income tax act remains the biggest demand, it will be interesting to see if the government hikes the Rs 2 lakh tax rebate on housing loans. Pavan Gupta, CEO, Muthoot Housing Finance Ltd believes that the move will help increase demand for housing projects.

"A hike in INR 2 lakh tax rebate on housing loans will result in increasing demand for housing projects, in the affordable housing category," he said. Gupta has also urged the Modi government to bring back Input Tax Credit (ITC) benefit for under-construction homes, which was removed earlier.

"While the government reduced the GST rate for under-construction homes to 5% in 2019, the earlier Input Tax Credit (ITC) benefit was dropped, which negatively affected the already cash-starved developers as they could not avail benefits on raw material. Thus, they eventually had to pass on the increased costs to the home buyers. Providing ITC benefit in the 2020 budget will help in reducing property cost, which will improve the buyer sentiment," he said.

He said that extension of partial credit guarantee (PCG) scheme as well as extension on relaxation of minimum holding period (MHP) criteria for Housing Finance Companies (HFCs) for another six months to June 2020 would support the securitisation market and contribute towards stabilising the liquidity situation.

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"Budget 2020 should ease the capital flow for HFCs and the overall housing sector, which will help in reviving the investor sentiment. This will also increase demand for ready to move in homes simultaneously keeping the price in check," Gupta added.

He also hopes that the government should consider fast tracking the implementation of alternative investment fund (AIF). The fund was announced by Finance Minister Nirmala Sitharaman last year in November to provide priority debt financing for the completion of stalled housing projects that were in the affordable and middle-income housing sector.

"Fast tracking the implementation of AIF funds will help in boosting demand by improving home buyer sentiment. Banks and NBFCs which have lent money to unfinished projects will be able to receive their payments. To this extent, the creation of new NPAs will be low," Gupta said.

The Union Budget 2020 will be presented by the finance minister on Saturday morning. You can catch all updates on #BUDGET2020ZEE.