“The February Union Budget
2020-21 raises questions about the impact of doing away with the existing tax exemption of Rs 2 lakh per annum on interest paid on home loans taken for residential property under the new tax regime,” said Adhidev Chattopadhyay, research analyst, ICICI Securities.
Chattopadhyay said there is lack of clarity on whether one can avail of the additional tax benefit under Section 80EEA for interest on affordable home loans of Rs 1.5 lakh per annum.
However, J C Sharma, vice-chairman of Bengaluru-based Sobha, said salaried employees will continue to avail of exemptions under the old regime and hence, there will not be any new demand challenges emerging.
Knight Frank’s Baijal said unless demand picks up across all price segments, there won’t be any real recovery in real estate.
The big two property markets already have a huge inventory pile-up. Mumbai Metropolitan Region had the maximum unsold inventory of 51,721 units, followed by the National Capital Region, which had 49,027 unsold homes.
“The supply is more than the demand in the upper mid-segment, but in the lower mid-segment, there is more demand than supply. The government wants developers to focus on the second segment,” said Amit Bhagat, chief executive, ASK Property Investment Advisors.
Sharad Mittal, director and head at Motilal Oswal Real Estate, said the government has been focusing on promoting affordable housing for the past four years. “It is up to the industry to walk down that road,” he said.
Bhagat said the government’s move to increase 10 per cent difference between circle rates and transaction is a good one in line with the market reality. “The government intervention to save homebuyers from harassment by the tax authorities will go a long way,” he said.
However, Motilal Oswal’s Mittal said this move will not push demand much.