Budget 2019: Impact on Home Loan & Real Estate Sector

Union Finance Minister Nirmala Sitharaman presented the first budget of the second term of the Modi government in Parliament on Friday, July 5th, 2019. In the Budget, the Finance Minister has made several announcements from women to youth and from salary classes to business persons. These announcements received relieved news from Middle Class. The Finance Minister has increased the income tax exemption on the interest payment of the Home Loan from Rs 2 lakh to Rs 3.5 lakh.

The Modi Government increased its interest deduction from 1.5 lakh rupees to 2 lakh rupees in the first budget in July 2014 on the home loan. Earlier the government was promoting the real estate sector by increasing the demand for construction materials such as cement, steel, and other material of the construction sector. But due to higher interest rates, there was no such hike visible in this sector.

What is the provision?

Tax Saving convenience is available on the repayment of both principal amounts and interest amount of the home loan. Under the section 24B of Income Tax, you were making a claim of deduction of up to 2 lac rupees from your total income for a self-occupied property. But now, it has increased to 3.5 lac rupees.

Likewise, under Section 80C of the IT Act, you can claim Rs 1.5 lac rupees on the repayment of the principal amount of home loan. If you are buying the house for the first time, you can get an additional tax deduction benefit up to Rs 50,000 under Section 80EE. But the loan amount should be less than Rs 35 lakh and the total cost of the house should not be more than Rs 50 lakhs.

Benefits of Pradhan Mantri Awas Yojana (PMAY)

Prime Minister Narendra Modi had announced the Pradhan Mantri Awas Yojana on June 25, 2015. The purpose of this scheme is to make available home to every citizen of the country by 2022. People having an annual income of 6 lakh can get a home loan up to Rs 6 lakh under this scheme. The government will provide a subsidy of 6.5% on the interest rate of home loan.

People who are earning 12 lakhs annually, they will get a loan up to rupees 9 lakhs. The government will give a subsidy of 4% on this loan. Loan up to 12 lakh rupees can be available for 12 to 18 lakh annual income group. The government will give a rebate of 3% on the home loan.

Real estate companies believe that by increasing the exemption limit on home loan interest, demand for affordable homes will increase rapidly; and this will help the real estate sector. This budget will make a boost to the housing sector.

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