Buying a home is the biggest lifegoal for countless Indians, something that they do not want to give up on despite the challenges the economy is currently facing. The aspirational common man and woman are tackling the challenges of a slowing economy by exercising caution over credit and implementing pragmatic strategies to realise their life’s biggest dream. They are giving expensive properties a miss and are keen on buying affordable homes so that they don’t end up exhausting all their resources in repaying humongous home loans over the next 20-30 years.
This pro-budget home trend was perhaps best encapsulated in the recently-launched BankBazaar Moneymood 2020 report that showed that home loans with a ticket size lesser than Rs. 30 lakh constituted a whopping 72% of the total number of home loans applied for on the online marketplace’s last year. An affordable home means lesser loan burden, lesser down payment requirement, and faster debt clearance, and it’s clear why they are becoming the first choice for many aspiring homeowners.
That being said, there are several factors that are actually boosting this growing interest in affordable housing. For the last few years, developers across the country have focused on building budget houses to be in line with the government’s “Housing for All By 2022” vision. Moreover, initiatives like the Pradhan Mantri Awas Yojana, RERA legislation, additional tax deduction benefits and preferential rates among other incentives for women home-buyers have helped the affordable housing sector. However, the liquidity crunch last year led to a decline in demand which has resulted in mounting inventories that builders are keen to clear on priority. All these factors have made the current real estate sector a buyer’s market providing aspiring homeowners with added leverage to be able to get the best deals on their home purchase.
However, many aspiring homeowners, especially those planning to buy their first home, would be closely following Union Finance Minister Nirmala Sitharaman’s Budget speech on February 1. And they would expect that she announces an extension of a couple of crucial deadlines.
PMAY deadline extension
One of the main benefits of PMAY-Urban has been the Credit-Linked Subsidy Scheme (CLSS) offered to first-time homebuyers from lower and middle income households. Under CLSS, an upfront subsidy up to Rs. 2.67 lakh on home loan interest repayment is provided to eligible homebuyers which can significantly reduce their loan burden. The CLSS scheme is implemented in four income categories with different eligibility requirements and benefit capping: Economically Weaker Sections (for those with annual household income of less than Rs. 3 lakh), Lower Income Group (for those with annual household income of Rs. 3-6 lakh), Middle Income Group-I (for those with annual household income of Rs. 6-12 lakh) and Middle Income Group-II (for those with annual household income of Rs. 12-18 lakh). However, while those who fall under EWS and LIG categories can avail the CLSS benefits until March 31, 2022, others who fall under MIG-I and MIG-II categories can benefit from this scheme only until March 31, 2020.
As such, aspiring first-time homebuyers looking for affordable properties who fall under MIG-I and MIG-II categories would hope the government announces to extend the PMAY deadline in Budget 2020 so that they have more time to avail the CLSS benefits.
80EEA tax-deduction deadline extension
In her Budget 2019 speech, FM Sitharaman announced an additional tax deduction benefit for eligible homebuyers of up to Rs. 1.5 lakh under Section 80EEA on home loan interest payments. This benefit is over and above tax deduction available to all home loan borrowers of up to Rs. 2 lakh on interest payment under Section 24B and up to Rs. 1.5 lakh on principal repayment under Section 80C. There are a few eligibility requirements that need to be met to avail 80EEA tax benefits: it only applies to first-time homebuyers who get their loans sanctioned between April 1, 2019, and March 31, 2020, and whose property value shouldn’t be more than Rs. 45 lakh as per the stamp duty. Also, the carpet area of the house needs to be within 645 sq. ft. if it’s located in a metro and lesser than 968 sq. ft. for other locations.
However, aspiring homeowners who tick all the boxes to avail this additional tax deduction benefit under Section 80EEA would expect the government, in its Budget, to extend the deadline beyond March 31, 2020. This would be greatly appreciated by the middle class as the additional tax benefit would help them save more on home loan interest payments which are at their peak during the first few years of a loan tenure.
The writer is CEO, BankBazaar.com, India’s leading online marketplace for loans and credit cards.