Budget and Housing Sector

Vinay D Lall The 1987-88 budget has improved the fiscal environment for stimulating housing-linked savings and investments. It is bound to increase the financial flows from the household sector into housing. However, in the process some inequities have been introduced in the tax treatment of different components of housing (land and building), new and old housing stock, type of housing unit (plotted unit and apartment unit), building agency, etc. It is necessary to remove these anomalies. The inclusion of repayment of housing loans under section 80C should be re-examined and instead deduction for housing loans should be provided under a separate section of the Income- tax Act, preferably merging the interest and capital components. Alternatively, a superior method would be to grant an investment allowance under which a specified per cent of housing cost should be deductible from the tax base over a seven-year period, subject to monetary ceilings on total deduction and annual deduction.