How Budget 2021 Helps Your Home Buying & Renting Decision?

Updated on: 14 Dec 2021 // 19 min read // Home Loans
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Thumbs up to Budget 2021 for boosting affordable housing. MyMoneyMantra brings an exclusive Post Budget Guide for new Home Loan aspirants. Real estate was already facing doldrums due to large scale unsold inventory and COVID19 worsened the crisis. However, RBI & GOI eased liquidity in banks to improve the credit flow among the customers.

Continuing benefits for Home Loan buyers Finance Mister N Sitharaman has extended duration for additional tax deduction of Rs 1.5 Lakh for affordable homes costing up to Rs 45 Lakh in the Budget 2021. Furthermore, the FM has granted one year tax holiday to builders of affordable housing and also offered tax exemption for affordable rental projects to cater housing needs of migrant workers. Overall these steps will address a large base of housing customers and thus push the growth of housing & construction work in the economy.

FM said in the Budget Speech:

In order to incentivise purchase of affordable house, it is proposed to extend the eligibility period for claim of additional deduction for interest of Rs 1.5 lakh paid for loan taken for purchase of an affordable house to 31st March 2022.

In order to increase the supply of affordable house, it is proposed to extend eligibility period for claiming tax holiday for affordable housing project by one more year to 31st March, 2022.

In order to promote supply of Affordable Rental Housing for the migrant workers, it is also proposed to allow a new tax exemption for the notified Affordable Rental Housing Projects.

Let’s understand the extent of these benefits announced in budget 2021 on your home buying & renting decision.

Affordable Housing Scheme Extended till March 31, 2022

The government has already announced extension of credit link subsidy under PMAY affordable housing scheme till March 21, 2022. Thus a first time home buyer can avail Home Loan for affordable unit at a subsidised Home Loan Interest Rate! The scheme has been extended till next year for low income group & economically weaker section. It is Indian’s government’s pilot project ‘Housing for all by 2022.’

Additional Income-Tax Deduction of Rs 1.5 lakh for FY 2021-22

By extending additional rebate on Rs 1.5 Lakh on Home Loan Interest payment in the Union budget-2021, FM has offered more cash in the hands of new Home Loan borrowers. Thus fresh Home Loans for residential units costing less than Rs 45 Lakh will avail total of Rs 3.5 Lakh deduction on Home Loan interest payment. Borrowers will also be able to enjoy Rs 1.5 Lakh deduction for principal payment under section 80C.

Tax Holiday for Real Estate Developers on Affordable Housing Projects

Budget 2021 has set up the right drivers for growth. With one year tax holiday for real estate developers on affordable housing projects, chances are high for further correction in real estate prices. Thus, if you are planning to buy first residential property and Apply for Home Loan, you can save more in your pocket up till 31-March-2022.

Tax Holiday for Developers Engaged in Affordable Rental Homes

The FM has also extended tax holiday of one year to real estate developers for building affordable rental homes. This again will boost the supply of small & affordable homes. The increased supply will rationalise property prices and rentals, thereby ensuring more saving for retail buyers. In all, budget 2021 has clearly made conducive sentiment for purchase of property.  The reduced rentals will help migrant labourers and work force avail of cheaper residential units on rent.

Reduction in Basic Customs Duty on Steel and Iron

The Budget 2021 has rationalised and reset custom duty on a large scale. With reduction in custom duty of Steel and Iron, you can further expect reduction in price of construction costs. The stamp duty of iron/ steel scrap has been made NIL from 2.5 % and that of steel has been drastically reduced from 10/ 12.5 % to 7.5%. Further the government of India has eased capital gains tax implications for developers and thus extended more relief to developers. The lowered cost of production will gradually be passed on to the property buyers.

Final Words

In all, real estate contributes to 8% to GDP. The growth of many other sectors is directly and indirectly aligned with the growth of real estate sector. By turning on the wheel of real estate segment, government aims to turn on growth wheel for all multiple related sectors, thereby reviving the economy swiftly after the unprecedented pandemic shocks of 2020.

Right steps for Atmanirbhar and Stronger Bharat in 2021!

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