New tax code to dent housing, fear bankers & realty firms

New tax code to dent housing, fear bankers & realty firms
The Financial Express, August 14, 2009, Page 13

fe Bureaus, Mumbai

The banks and real estate companies are apprehending that the removal of tax benefits on the interest portion up to Rs 1.5 lakh of any housing loan as proposed in the draft tax code will hamper the growth of housing finance and real estate business.

Niranjan Hiranandani, managing director, Hiranandani Constructions, “This is a very wrong decision as world over tax exemption on housing loan is encouraged to provide boost to the real estate sector. Government will have to restore the tax reforms as demand in real estate business will be badly impacted.”

Hemant Shah, chairman, Akruti City said that the new draft tax code will dampen the sentiments of buyers to the extent that tenants who would be looking at buying first time homes on ownership basis will refrain from inquiring.”

Parthasarathi Mukherjee (president, credit), Axis Bank said first time buyers of housing property do not take their decisions based on tax sops and incentives only. The proposed change will not affect them. However, investors or second home buyers are likely to base their decision pertaining to the taxation angle. So, it’s a mixed effect. Thus it’s too early to comment on the overall impact of these changes on housing mortgage business in the country.

M Narendra, executive director, Bank of India also said the first time home loan borrowers will anyhow continue to go for the home loans.

“Only the affected may be those home loan borrowers that are going for the second or third time for the loan. Now we have to see that the interest rates on our home loans are to be kept competitive and the houses must be available at affordable cost, “ he said.

BoI’s home loan portfolio comprises Rs 6,900 crore and it wants to see a growth of 25% in that space by the end of the fiscal.

However Naina Lal Kidwai, HSBC India CEO and group general manager said “I would like to believe that the recent declaration regarding housing tax exemptions in draft direct tax code is not going to affect the growth of housing mortgage in the country. If someone likes to buy a house, he or she does not look at tax exemptions facility usually. The direct tax cuts announced in the bill are major. People are likely to have more money in their hands at their disposal to pay housing loan installments in the longer run.”