Is Housing Loan a Saving? Finance Secy Says No, P Chidambaram Asks Him to ‘Re-examine’Theory

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 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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