Why is the Government pushing more for home loans in India?

The home loan is an essential part of the purchase of a house in India. The home loans can help buy the home to an individual in an early stage without sufficient funds as the applicant can repay the loans in tenure of 30 years depending on the borrower’s age. The loans can be availed at interest rates of 6-10% per annum, and some processing fees are also charged to the borrower. The loans help push the real estate sector and help people buy the houses by paying the installments for a longer duration. As real estate prices are very high, most people cannot buy homes without obtaining loans from lenders. The loans installment, along with the principal and interest amount, is non-taxable up to Rs.2 lakh beyond the tax slab of Rs. 2.5 lakh under the income tax act 80C. The loans have become an integral part of the house making as most people cannot afford to buy a house on a full down payment basis. The bank provides 80% of the property value as loans to the borrowers, while the remaining 20% needs to be paid by the borrower as a down payment amount.

The Government of India encourages people to buy homes by providing tax benefits and bringing various schemes to buy the houses. The Pradhan Mantri Awas Yojana scheme that the Government of India has launched for the people living in the urban region to buy their own homes. For the rural area, there is another scheme for the people to construct permanent shelters. The major aim of the scheme is to help people buy their own houses. The migration of people from the Rural to urban regions in search of opportunities has led to many people being homeless. Thus, people can avail the subsidy of up to Rs.2.67 lakh to avail loans and buy their permanent shelter under the scheme. Loans availed in joint name with a female are necessary for the PMAY scheme; thus, the ownership of the women has increased due to the scheme. The Government of India aims that by 2022 all the people should have their own houses, which are still a distant reality. This scheme is applicable only for those people who do not own any property anywhere across India.

Reasons for the Government pushing home loans in India:

• The real estate industry is the second largest employer after agriculture in India. Many people from all sections of society work in the real estate sector, right from laborers, supervisors, engineers, technicians, and management professionals in offices. Also, indirect people like construction material manufacturing companies, suppliers, contractors & consultants related to architecture & structural engineering depend on the real estate sector.
• There are many lenders amongst the banks & NBFC’s which are dependent on home loans. Thus many people are directly reliant on the home loans department of the banks. Thus for them, the sale of houses & against that disbursement of loans is significant.
• The Government collects a vast amount of taxes in GST, registration & stamp duty charges, development charges. Thus most of the revenue from tax collection is dependent on real estate sales. And home loans are an integral part of the real estate sector.
• The expenditure required to buy a house is high; thus, it leads to high spending amongst the individuals who can boost the overall economy. Therefore the sale of homes is essential.
• Home loans help people buy homes in an early stage of their career; thus, loans help boost the real estate sector.
• The revenue in an indirect way to Government also includes the gain from the sale or auction of land, GST on construction material, GST on the home loans processing, which can lead to indirect revenue generation of indirect taxes to the Government.

Conclusion:

Thus, we can conclude that the Government encourages people to buy houses through home loans. It gives a boost to the economy, and people enjoy the benefits of ownership of the property. Thus home loans market is growing exponentially by 22% per annum, which is a consistent growth for the home loans industry. There are lacks of beneficiaries under the PMAY scheme who have availed subsidies on the loans interest rates from the Government.