Budget sops spur hopes of buying that dream house

Living in ones own house has always been one of the biggest aspirations of all Indians.

Living in ones own house has always been one of the biggest aspirations of all Indians across various income groups. Advertisements portraying the dream of moving out of the chaotic rented apartment into ones own house have struck a chord with the finance ministry. In the Budget 2013-14,finance minister P Chidambaram has provided housing loan wings to break away from the quagmire of inflation and increasing interest rates.

The Budget proposes to provide an additional deduction of R1 lakh for interest paid on housing loan for first-time house buyers. This deduction is over and above the already available deduction of interest payment available while calculating income from house property. This tax break will push many to buy their first home. This will also improve demand for homes,especially within the budget and affordable segments. Adding to an individuals sense of growth,stability and achievement,it is in line with the aim of higher growth,leading to inclusive and sustainable development.

However,the boundary of this affordable housing has certain walls of restrictions the home loan should not exceed R25 lakh and the value of house property should not exceed R40 lakh. Thus,it will promote home ownership mainly in smaller cities and peripheral areas and distant suburbs of metros. Additionally,this loan must be sanctioned between April 1,2013,and March 31,2014. The said deduction of additional interest of R1 lakh is a one-time deduction and the unutilised deduction can be carried forward till March 31,2015. So,if an individual avails of a deduction of,say R70,000,in FY14,he will be allowed to claim the balance R30,000 deduction in FY15.

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On a macro level,this proposal comes as a blessing in disguise for real estate developers who have been plagued with falling demands and growing unsold stock. It will have a trickle-down impact on a number of industries contributing to the real estate sector,such as cement,steel,brick,wood and glass. Thus,buying your dream home will also fulfill dreams of the many unemployed as a demand hike in the housing sector will create jobs for thousands of construction workers. Indeed,this may boost economic development at large. With this additional deduction,the finance minister has successfully catered to the dream of having ones own home and bought cheer to many.

The author is senior tax professional,Ernst & Young. Views expressed are personal