The government is contemplating a new round of home loan initiatives aimed at making homeownership more accessible for the middle class. Recently, PSB announced a campaign with reduced home loan rates, yet the offering did not meet the expectations of either the public or property developers. Under this initiative, home loans up to five lakh rupees have been made available with an interest rate of 8.5%. Loans exceeding five lakh but falling short of twenty lakh rupees can be availed from PSB at 9.25%. However, the availability of houses priced up to twenty-five lakh rupees in major urban centers is questionable, leading builders and developers to express skepticism regarding the scheme's effectiveness in alleviating the current market slowdown.
As the country grapples with one of the most severe industrial slowdowns in the past fifteen years, concerns arise regarding its potential damage to the economy. The government is thus strategizing to counteract this trend, recognizing its crucial role in shifting public sentiment.
To bolster the affordability of funds for consumers, the government is considering elevating the existing loan limit from twenty lakh rupees to thirty lakh rupees at concessional rates, which could cater to a significant number of buyers in metropolitan areas such as NCR, Mumbai, Bangalore, Pune, Chennai, and Hyderabad. With the proposed adjustment, buyers could purchase properties priced as much as thirty-five lakh rupees using these affordable loans.
Additionally, reports indicate plans to enhance the tax rebate on interest payments for home loans. Current provisions allow a deduction of up to Rs 1.50 lakh on the interest for home loans pertaining to self-occupied residences from the taxable income. The limit is anticipated to be raised to two lakh rupees, further diminishing borrowing costs.
Presently, if a borrower secures a loan of thirty lakh rupees at a concessional rate of 9.25%, the interest payment for the first year would amount to approximately Rs 2,77,500. Out of that, the individual can only deduct Rs 1.50 lakh from their income for tax purposes, resulting in a tax savings of Rs 45,000. Consequently, the net interest paid in the first year would total around Rs 2,32,500, which effectively reduces the net interest rate on the loan to 7.75%, substantially lower than the original 9.25%.