05 MAY, 2021

Budget 2021 has brought some good news for potential homebuyers. The property rates might reduce further. Therefore, if you are planning to purchase your first home, this might just be the right time. To finance your property purchase, you can consider availing a home loan. In this article, we decode the impact of Budget 2021 on home loans to help you understand its effect on your goal of purchasing a house. Read on to learn more about the same:

Impact of Budget 2021 on Home Financing Interest rates - First-time homebuyers who are looking to purchase a house under the Pradhan Mantri Awas Yojana (PMAY) can avail home loans at an effectively lower interest rate. This is because the Credit Linked Subsidy Scheme (CLSS) for Middle Income Group (MIG) has been extended up to March 2021. Additionally, the last date to avail Credit Linked Subsidy Scheme for Low Income Group (LIG) and Economically Weaker Section (EWS) has been extended to 31st March 2022. As a result of this, beneficiaries under the PMAY scheme will be eligible for an effectively lower home loan interest rate.

Tax benefits - For home loans sanctioned between 1st April 2019 and 31st March 2021, borrowers could also claim a deduction on the interest component of the home loan under Section 80EEA of the Income Tax Act, 1961. Borrowers are entitled to this home loan tax benefit only if the property’s value does not exceed Rs. 45 lakhs as per the stamp duty valuation. Since the real estate sector has been affected severely due to the COVID-19 pandemic, the Government decided to extend the date beyond 31st March 2021, and now borrowers can get this benefit for home loans sanctioned till 31st March 2022.

Moreover, in this budget, there has been some tax relief related to stamp duty valuation too. Earlier, if someone sold an immovable property below the stamp duty valuation, the difference was taxable in the hands of both the seller and the buyer. However, in 2013 the government had provided for a tolerance level of 5% between the two values to provide relief in cases of marginal difference. In this budget, this tolerance level was increased to 20% owing to the difficulties faced by people in selling their house property. For this benefit, the agreement value of the property should not exceed Rs 2 crore and should be bought from developer as first allotment between 12th November 2020 and 31st March 2021. 

Benefits on rent - Moreover, with an aim to help migrant workers, the Government shall introduce ‘rental housing projects’ to offer houses on affordable rents. This move is expected to benefit a large population belonging to lower-income groups who migrate to different cities in search of employment opportunities.

Probable lower prices- The Government has also lowered the custom duties on components used for construction purposes, such as iron and steel. This is expected to reduce the overall construction expense of the houses. Hence, it is expected that the builders will pass on the benefit of reduced cost by lowering the home prices for potential homebuyers.

Right Time To Buy a Home

Other than the above-mentioned measures by the government in Budget 2021, there are other factors too that support the idea of buying a house soon. Real estate prices have stagnated or even fallen in some places due to low demand in the wake of Covid-19. Moreover, Reserve bank of India has also reduced the repo rate to boost the economy, which would also benefit home loan borrowers.

Now that you are aware of these factors, including the developments in Budget 2021, consider fulfilling your aspiration of buying a home. To finance your property purchase, you can avail a home loan with Kotak Mahindra. Easy application process, minimal documentation, quick home loan sanction, and less processing fee are some of the major benefits of availing a home loan with Kotak Mahindra Bank.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.