Rs.1L Deduction in home loans may boost affordable housing demand

First time home buyers are given a reason to be happier and more cheerful now. They will be given an additional benefit of Rs.1 lakh deduction for the interest rates for their home loans up to Rs.25 lakh.

Though the new proposal included in the budget 2013-14, it will be applicable only to the first time home buyers. In short it gives no reason for smile for the second home buyers or who wish to move to a better home with the help of  home loans.

As the limit of home loans is fixed as Rs.25 lakh, the demand for housing units will be more only in the tier II cities. In major cities the housing demand may not be improved as the home loans limit is very lower to the normal property prices existing in these cities.

Some of the realty experts have already discussed the matter with low opinion. In their opinion the home loans’ limit should have been up to Rs.35 Lakh or more. If the loan limit was raised, then the demand for housing units in the major cities also would have seen an upward growth.

This Rs.1 lakh deduction can be considered as the boost to the entire real estate sector. Though the regulatory bill and infrastructure status were expected to be included in the budget 2013, they were not included. The budget remained highly moderate and there was no special boost to any of the sectors.

Another important demand of the real estate developers was speedy clearance. However there was no positive step taken to speed up the clearance of the projects. Economic Survey 2013 had reported that delay in clearances is one of the main causes which shoot property prices up.

Rs.1 lakh deduction, however, is meant for the middle and lower income group and not the high end property takers. On the other hand the top end buyers will be more afflicted as they will have to bear additional burden.

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