Budget 2023: How Can Rising Rates Of Interest On Home Loans Be Spurred? Basic Home Loan Founder Opines

Atul Monga, Founder of Basic Home Loan, has spoken to India.com and shared his perspectives on the rising interest rates, incentives that the real estate sector is looking forward to, and more. Read excerpts from the discussion.

New Delhi: As India eagerly awaits Union Budget 2023, each sector is hoping for some sort of relief from the Finance Minister. When it comes to the home loan sector, it is said that even though the demand for home purchases is unlikely to come down in the near future, financing the purchase will become increasingly costly.

Atul Monga, Founder of Basic Home Loan, has spoken to India.com and shared his perspectives on the rising interest rates, incentives that the real estate sector is looking forward to, and more. Given below are the excerpts from the conversation.

What do you think the government will offer to spur the rising rates of interest on home loans?

Residential property sales hit an all-time high in 2022. This has led many people to anticipate that the housing sector would do well in 2023 too. Many real estate consultants have even expressed their surprise at how quickly this sector recovered from the effect of Covid-19 and surpassed all expectations despite the RBI increasing the repo rate by 225 basis points from April 2022 to December 2022.

However, with inflation showing its impact on the prices of daily necessary items and the fear of recession rebounding, further rate hikes by the RBI cannot be ruled out. Homebuyers are currently hoping that Finance Minister Nirmala Sitharaman will provide some relief in the upcoming Union Budget 2023. Home loan borrowers would get some relief if the government either increases the tax deduction limit under Section 80C or introduces the tax deduction on principal repayment of housing loans as a separate benefit. Apart from this, increased tax deductions for home loans will offset the increased EMI burden and leave some surplus to spend, stimulating the Indian economy.

What are the incentives that the real estate industry is looking forward to in the upcoming budget?

In recent years, the government has prioritized affordable housing, and its expansion is dependent on a variety of incentives and policy provisions. The budget could include increased funding for the Pradhan Mantri Awas Yojana, a government programme that provides affordable housing to the urban and rural poor. Apart, it could announce the much-needed tax breaks for developers who build affordable housing projects.

At present, there’s a tax deduction on home loan interest up to Rs 2 lakh. Are you expecting the government to increase the deduction limit on home loans? Do you think it will increase the momentum of housing demand?
Under Section 24 of the Income-tax Act of 1961, homebuyers can currently claim an income tax deduction for the interest paid on their home loan. There has been no change in the maximum deduction limit since 2016-17. For a self-occupied property, the maximum deduction that can be claimed is Rs 2 lakh per fiscal year.

Investors and home buyers have been fervently seeking more tax breaks for the past many years. The Section 24 tax credit for housing loan interest should be increased to at least Rs 5 lakh. This will increase housing demand, particularly in the affordable segment.

The government of India is hell-bent on spending massively on infrastructure development. How do you think it is going to help the home loan industry and the buyers? What other measures can you suggest to the government to implement that help both consumers and businesses?

The country has been functioning on archaic laws since its independence. There is a need to do away with impractical rules and lay the groundwork to simplify complicated laws. To streamline the land acquisition process, the budget could simplify procedures for obtaining land titles, for example. In addition, the government must remove the cap of Rs 2 crores on capital gains for reinvesting in more than one property.

Offering financial assistance to affordable housing developers for land acquisition would be another step in the right direction. Many people harbour the wish to buy their own homes. However, rigid laws and age-old taxation rules have always been more of a hindrance than an aid. It’s time to get rid of those redundant and irrelevant regulations.