Property investors never had this bad. The slowdown in real estate has stagnated the price and the demand dwindled further with demonetisation. And now, the Budget announcement came as double whammy.
From the next financial year, you would only be able to claim a maximum deduction of Rs 2 lakh on home loan interest rate across all properties. Say, you have an ongoing home loan for a house. You get tax deduction of Rs 1.5 lakh on the principal under Section 80C and also a deduction up to Rs 2 lakh on the interest paid under Section 24. If you decide to buy a second house, you can only claim a total deduction up to Rs 2 lakh in the home loan interest for both the house. If your interest on the first house is already Rs 2 lakh, you will not get any deduction on the second house.
In his Budget speech, the finance minister said: “In order to address the existing anomaly of interest deduction in respect of let out property vis-à-vis self-occupied property, it is proposed to restrict set off of loss from house property against income under any other head during the current year up to Rs 2 lakh."
The buyer can, however, carry forward the interest rate that he has not claimed for eight assessment years. This can only be set off against the rent you get from the house.
Partial cash payment has always been part of property transaction. Cheque payments were done based on the ready reckoner or circle rates of the property while any amount above that was paid in cash. The developer issued receipts for the cash amount. This helped the buyer to pay a lower stamp duty and registration. In the Budget, the government has banned cash transactions above Rs 3 lakh. This means, the buyer will now be liable for penalty if there’s any cash transaction above Rs 3 lakh. These steps, capping on interest rate deduction and ban on cash transaction, would increase the cost of purchase.