To gauge the government’s stance on home loan interest rates in Budget 2024, homebuyers and industry experts should closely monitor official statements, policy announcements, and economic indicators, says Atul Monga, CEO and Co-founder, Basic Home Loan.
In an interview with MintGenie, Monga said that reviving expired incentives, such as tax breaks, is crucial for affordable housing.
Edited Excerpts
Can you provide an overview of the key expectations and speculations surrounding Budget 2024, specifically about home loan interest rates?
As Budget 2024 approaches India’s real estate scenario amid an upcoming election year, the focus is on potential changes to home loan interest rates under Section 24 of the Income Tax Act. Currently capped at ₹2 lakh, experts suggest raising the limit to at least ₹5 lakh. This adjustment is crucial for revitalizing the budget housing sector, which has seen a decline in demand. The proposed increase in deduction has the potential to boost the market, encouraging potential homebuyers to invest in affordable housing. Additionally, stakeholders anticipate the introduction of tax deductions for first-time homebuyers, making property acquisition more attractive and revitalizing the overall housing market for sustained growth.
How do you foresee the potential changes in home loan interest rates affecting prospective homebuyers?
Prospective homebuyers could experience significant benefits if the government implements recommended changes in home loan interest rates. Increasing the Income Tax Act Section 24’s home loan interest rate rebate from ₹2 lakh to ₹5 lakh would likely stimulate the housing market. This adjustment, coupled with measures such as reducing repo rates and offering tax holidays to developers, could attract genuine homebuyers and boost demand.
The proposed changes may particularly benefit affordable housing homes, which faced a 20% decline in sales in 2023 due to the pandemic. Reviving expired incentives, such as tax breaks, is crucial for affordable housing. Modifying eligibility criteria based on income, property size, and price, in alignment with the Ministry’s definition, is recommended. Adjusting qualifying costs for city properties, like raising the budget to ₹85 lakh for Mumbai, ensures broader accessibility to government subsidies and reduced GST rates. These changes collectively create a favourable environment for prospective homebuyers and contribute to the overall recovery of the housing market.
What indicators or signals should homebuyers and industry experts look for to gauge the government’s stance on home loan interest rates in Budget 2024?
To gauge the government’s stance on home loan interest rates in Budget 2024, homebuyers and industry experts should closely monitor official statements, policy announcements, and economic indicators. Signals may include any mention of housing policies, tax incentives for homebuyers, or changes in income tax deductions related to home loans. Additionally, cues from the overall economic outlook, inflation rates, and fiscal policies can offer insights into the government’s approach. Political and economic stability, coupled with a focus on affordable housing in official communications, can serve as key indicators of the government’s stance on home loan interest rates.
What role do tax rebates play in influencing home-buying decisions, and how might Budget 2024 address this aspect?
The introduction or enhancement of tax rebates can act as a catalyst, encouraging prospective homebuyers to enter the market. Budget 2024 may focus on expanding existing rebates or introducing new ones, aligning to stimulate a more robust housing market. This strategic approach can address the challenges faced by the budget homes segment, potentially revitalizing demand and fostering a positive environment for home buying decisions.
What advice would you give to individuals currently in the process of buying a home, considering the uncertainty surrounding Budget 2024?
For individuals navigating the homebuying process amid uncertainty about Budget 2024, I recommend staying informed and flexible. Keep a close eye on potential policy changes, especially related to tax incentives and interest rates. Engage with financial advisors to understand the implications for your specific situation. Consider locking in favourable interest rates and explore pre-approval options. Maintain a balanced approach, factoring in your financial stability and long-term goals. Being adaptable and well-informed ensures you can make informed decisions, mitigating risks associated with potential changes in the real estate and financial landscape.
To what extent do you think the government’s economic goals and priorities will shape the decisions regarding home loan interest rates in Budget 2024?
The government’s economic goals and priorities will likely wield significant influence over decisions on home loan interest rates. If the focus is on economic recovery and stimulating the real estate sector, we may see measures such as interest rate adjustments to encourage home buying. Alternatively, if the government prioritises fiscal discipline and inflation control, it might adopt a more cautious approach. The interplay between economic objectives and housing policies will be crucial in determining the stance on home loan interest rates, reflecting a balance between promoting growth and maintaining financial stability.
Are there any specific measures or policies that you believe should be implemented to stimulate the real estate sector in the upcoming budget?
In the upcoming budget, implementing specific measures can stimulate the real estate sector. First, a revaluation of the affordable housing criteria, adjusting price limits to ₹70-75 lakh for metro cities, can broaden accessibility. Additionally, releasing government-owned land for affordable housing addresses shortages and lowers overall real estate prices. Expectations also include the implementation of the interest subvention scheme for urban housing, offering substantial interest subsidies on loans up to ₹50 lakh. This move aims to boost home loan demand, particularly for lower-income urban homebuyers, revitalizing the housing market and aligning with broader efforts to make housing more accessible and affordable post-pandemic challenges.
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