Impact of Budget 2018 on Home Loan Interest Rate

With the commitment to provide housing for all, the Indian government has introduced several initiatives to give the real estate segment a nudge since Budget 2017. The creation of the Real Estate Regulation and Development Act, 2016 (RERA) with effect from May 1, 2017, strengthened has been a step in the light direction.

To further its efforts, here's a look at some changes to Budget 2018, which if implemented, will make buying a home and getting a home loan more affordable.

Improvement in Tax Benefits for First-Time Homebuyers

If you have bought a home between April 1, 2016 and March 31, 2017, as per Budget 2017, you can claim a deduction on the interest, up to Rs.50,000 each year, until you clear the loan. For starters, this facility should be available to those who have bought a house for the first time beyond March 31, 2017 too. Also, this provision specifies that you can only claim this deduction as long as the value of the property is up to Rs.50 lakh. But, this limit is restrictive for many first-time homebuyers and would benefit you if it were to be increased.

As a first-time homeowner you can get excellent benefits on your home loan if you choose your lender correctly. For example, Bajaj Finserv gives you a host of benefits when you take a Home Loan, including as a 3-EMI holiday, top-up loan facility, and a convenient part prepayment facility.

Better Benefits for Pre-Construction Properties

The interest you pay on a home loan for an under construction property, is eligible to be claimed in 5 instalments once the construction is complete. So, if the interest is Rs.6 lakh, once construction is finished, you can claim Rs.1.2 lakh every year, for 5 years. On paper, this seems like a benefit, but, in total, you can only claim up to Rs.2 lakh towards pre-construction interest as per Section 24. So, an increase in the limit will help you immensely, as will a change that allows you to claim interest in same year as when you pay it.

Improvement on the Housing Set-Off Limit

As per the Finance Act, 2017, you can set off a loss from house property against any other income, up to Rs.2 lakh. You can carry forward the amount that exceeds Rs.2 lakh and adjust it against the rental income earned in the next few years. This set-off limit and deductions are not applicable for self-occupied houses.

Given the lengthy tenor of the home loan, there is a very slight chance of there being sufficient income to set-off the loss once it is carried forward, within 8 years. To help you cope with the rising prices of property and high loan amounts, this limit of Rs.2 lakh should be increased in Budget 2018.

With these measures in place, you can expect borrowing a home loan and buying a home to become easier and more affordable in the near future.

Also Read: Buying a Home Made Easy - Few Tips