The real estate industry in India has requested the government to lower the interest rate applicable to home loans in an effort to increase home sales following a poor run in 2019. The industry wants the new home loan rate to stand at 7% whilst also urging the government to raise the interest-tax deduction to Rs.5 lakh. The National Real Estate Development Council, the country’s industry body, also requested the Centre to redefine affordable housing finance by lowering interest rates and it aims to offer tax benefits to larger houses that are priced at above Rs.45 lakh.
The Finance and Housing Ministry has received a representation from the National Real Estate Development Council, and developers asserted that reviving the housing industry could enable the economy to pick up from a disappointing 2019. The president of the National Real Estate Development Council, Niranjan Hiranandani, revealed that 269 allied industries that have a multi-dimensional impact on improving the country’s GDP growth including the creation of employment could be affected positively by such a change.
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He added that the real estate industry in India is looking forward to a holistic solution instead of the piecemeal solutions they have received so far. According to the National Real Estate Development Council, bold fiscal measures will be taken to resurrect an industry that is reeling at the moment. He said that reducing the interest rate to 7% in different housing loan would increase sales as it would become more affordable for a larger section of society, thereby benefitting the economy of the country as a whole.
Tax reforms suggested along with an increase in deduction
The real estate sector also suggested reforms to tax laws and increasing the deduction on home loan interest from Rs.2 lakh to Rs.5 lakh in an effort to enhance sales. The Council also asked the government to redefine ‘affordable housing’ as most of the houses in the National Capital Region and the Mumbai Metropolitan Region as well as other metros do not match the current definition. A house that is defined under affordable housing must have a carpet area of less than 60 square metres and should not cost more than Rs.45 lakh so that it can qualify for a lower 1% GST rate, according to the income tax and GST laws.
According to an annual report released by Knight Frank, a real estate consultant, sales of houses in the top 8 cities of India recorded a year-on-year growth of just 1% in sales volume last year. In 2018, the number of units sold stood at 2,42,328, and in 2019, the figure increased marginally to 2,45,861 units. The real estate industry is confident that a reduction in unit sizes and ticket sizes will increase the affordability of these projects and subsequently contribute towards the revival of the industry while also contributing towards the overall GDP growth.
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