New Delhi, Feb. 14: House-hunters, time to get cracking.
For those planning to buy a house, the coming financial year could be a good one to look forward to. Provided, of course, the finance ministry is willin'.
The housing ministry has proposed a slew of tax concessions for home buyers and the construction sector, which supports over 200 related industries.
For one, the ministry has suggested raising the tax exemption ceiling by Rs 50,000 for those who take housing loans.
Now, under Section 24 B of the Income Tax Act, a maximum of Rs 1.5 lakh can be deducted from the taxable income of a person who has taken a housing loan.
The ministry has proposed that this ceiling be increased to Rs 2 lakh in the financial year 2013-14.
Another concession the ministry has mooted is tax relief on income from rents.
The suggestions have come at a time studies have revealed a shortage of 18.78 million dwelling units. The most hard-pressed are the economically weaker sections (EWS) and those in the low-income group (LIG) as these categories of homes account for more than 96 per cent of the deficit.
According to studies by the McKinsey Global Institute, the housing shortage could go up to 38 million units by 2030.
The economic think tank has also pointed out that taxes and fees account for approximately 27 per cent of the final cost of an EWS or LIG dwelling unit.
The ministry has proposed that the housing sector be accorded "infrastructure" status.
Under the income tax act now, infrastructure is defined as "road, bridge, airport, inland waterways and inland ports, rail system or any other public facility of a similar nature as may be notified".
If the housing sector, which accounts for about 5 per cent of the GDP, is accorded infrastructure status, it would help developers get a host of tax concessions and also allow them to seek loans from foreign countries. "If more money pours into the sector, the cost of houses will automatically come down," said a senior official.
The ministry has also proposed service tax exemption for all affordable housing projects.
Since housing loans are easily available for the middle classes, the average age of a middle-class house owner has come down by 20 years over the past decade.
So that the urban poor also benefit, the ministry has suggested increasing the loan ceiling from Rs 2 lakh to Rs 5 lakh for this category.