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Limited scope
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New Delhi, Feb. 28: The benefit of an additional interest deduction of Rs 1 lakh on home loans of up to Rs 25 lakh for first-time home buyers announced by finance minister P. Chidambaram will be limited to smaller cities in the absence of affordable housing projects in metros.
This one-time exemption is in addition to the Rs 1.5 lakh home loan interest deduction allowed for self-occupied properties. If the limit of Rs 1 lakh is not used up in the first year, the balance may be claimed in the next accounting year.
Industry insiders believe that it will only help in the growth of housing projects in tier-II, III and IV cities and is likely to push demand in these areas. It will help many unlisted developers who offer small to mid-sized homes and listed firms such as DLF, Unitech and Godrej who have projects in smaller cities.
“This provision is only for the first year and with a carry-forward benefit of the unutilised deduction to the second year. This will help to boost housing sales in tier II and III cities, peripheral areas and distant suburbs of metros, but not within the metros, where housing is more targeted towards the middle and upper income segments,” said Anuj Puri, chairman and country head, Jones Lang LaSalle India
Earlier, the limit for loans was Rs 10 lakh. “It is just a marginal increase from what was offered earlier. It did not help first-time home buyers much because of a lot of practical problems,” said R.K. Arora, chairman and managing director of Supertech Ltd.
Chidambaram today also announced the setting up of a Rs 2,000-crore urban housing fund along with the provision of Rs 6,000 crore of additional funds for the rural housing fund. “It is proposed to start a fund for urban housing to mitigate the huge shortage of houses in urban areas. I propose to ask the National Housing Bank (NHB) to set up the urban housing fund and, in consultation with the RBI, I propose to provide Rs 2,000 crore to the fund in 2013-14,” he said.
The urban housing fund will be set up by the NHB and will help to finance the construction of budget and affordable housing in cities. “The urban housing fund has been created for the first time. We will be formulating a scheme for it soon. These funds will be utilised to refinance banks, housing finance companies and RRBs for their retail loans in urban areas and the thrust will be on lower loan slabs,” NHB chairman R.V Verma said.
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