Budget 2013: Housing proposals may encourage lower, middle income groups

KOLKATA: The budget proposals related to the housing sector are expected to encourage the lower and middle income groups to take home loans, captains in the housing finance sector said.

Finance minister P Chidambaram has proposed setting up of a Rs 2000-crore dedicated fund for building dwelling units in urban pockets and raised the allocation by 50% for rural housing units. He has offered additional tax sops for home loans up to Rs 25 lakh.

DHFL Vysya Housing Finance managing director R Nambirajan said: "The proposals are aimed at encouraging the lower and middle income group to take housing loans."

A senior official with GIC Housing Finance also welcomed the proposals saying that tax breaks will encourage the housing sector as a whole.

Home buyers can claim an additional deduction of interest of Rs 1 lakh to be claimed in 2014-15 over and above the deduction of Rs 1.5 lakh available now for self-occupied properties under section 24 of the Income Tax Act. If the limit is not exhausted, the balance may be claimed in the next fiscal.

However, it is not clear whether the fund for urban housing targets any particular segment. The FM's budget speech is silent on this aspect.
"It is proposed to start a fund for urban housing to mitigate the huge shortage of houses in urban areas. In consultation with RBI, I propose to provide Rs 6,000 crore to the Rural Housing Fund in 2013-14," Chidambaram said without specifying the target segment.

In so far as the rural housing goes, he proposed to raise the allocation to Rs 6,000 crore from Rs 4,000 crore.