Realty sector wants more tax benefits on home loans

In many ways, the upcoming Union Budget for 2013-14 will pave the way for real estate growth over 2013. Some of the key expectations of Indian real estate sector from Union Budget 2013-14 are: Giving industry status to real estate sector. Apart from being a major driver for growth, the real estate sector in India is one of the largest employment generating sectors in the country and influences performance of allied industries like steel and cement.

In spite of this, real estate sector in India does not enjoy industry status and is devoid of corresponding benefits.

Award industry status to real estate sector in India. This will improve funding to the sector, including lower interest rates on loans and simplify approval process and increase transparency. An individual is entitled to claim both the interest and principal components of home loan repayments for tax benefits.

However, the ceiling under tax benefits is currently capped at Rs 1,50,000 towards the total interest payable on the home loan and Rs 1,00,000 for principal paid (under Section 80 C). The ceiling of Rs 100,000 for principal paid under Section 80 C is less, when home loan principal repayments are clubbed with other tax saving instruments.

Budget expectation: Principal repayments should be treated as a separate tax exemption entity and excluded from benefits under section 80 C. Deductions towards the total interest payable on the home loan should be doubled from existing cap of Rs 1,50,000 to Rs 3,00,000.

The above benefits will stimulate end user demand, particularly for mid range housing and also result in tax savings for the individual which will further spur consumption.