Former Union Finance Minister P Chidambaram on Sunday said that Finance Secretary T V Somanathan should re-examine his theory on housing loan, where the latter had said that a housing loan is not a saving.
Chidambaram was referring to the Finance Secretary’s recent interview with The Hindu where he said that a housing loan is not a saving from the macroeconomic aspect but “merely a push towards certain things”.
In a series of tweets, Chidambaram explained how it could be a saving. “The Finance Secretary asks “Is the housing loan a saving?” His answer is ‘No’. I wonder how many people will agree with the Finance Secretary,” he said.
The Finance Secretary asks “Is the housing loan a saving?” His answer is ‘No’I wonder how many people will agree with the Finance Secretary
— P. Chidambaram (@PChidambaram_IN) February 5, 2023
“The payment of interest and the instalments of the loan is indeed an expenditure, but it is expenditure which is converted into an asset, which is a saving,” he said, referring to a housing loan.
“Suppose you spend the same money on a holiday or at a race course: there will be no asset at the end,” he wrote.
“The Finance Secretary should re-examine his theory that a Housing Loan is not a saving.”
In his interview, the Finance Secretary spoke about the benefits of the new tax regime and disagreeing that the old tax regime encouraged savings, he said that a housing loan is not a saving.
“If you look at the structure of the tax deductions, half of them are for savings and half of them are for dis-savings like housing loan or interest on housing loan. Is the housing loan a saving? So overall macro economic impact, it’s not a savings push at all but merely a push towards certain things.
“Government wants you to do housing, insurance or pension. But it’s not necessarily a savings push or influence the savings rate in the country,” he told The Hindu.
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