A lot of Indians lean towards home ownership because it represents stability for a family. In addition to being a part of the culture, buying a home also is considered to be a vital lifetime investment. But what factors are most important when deciding whether to buy or rent? How much will renting cost you in comparison to the EMI for a comparable property? The answers to these questions vary depending on your budget and your needs.
Tax benefits
Investing in a home is one of the most lucrative ways to earn good returns and save taxes. The benefits of buying a home can be reaped over a long period of time, but it is important to plan your investment carefully. Tax benefits of buying a house in India are possible if you follow the right steps. You can even get home insurance to cover unforeseen situations. The more you plan, the more savings you will enjoy.
First-time homebuyers can claim income tax benefits of up to Rs 1.5 lakh if they purchase a residential property. The property should have a stamp duty value of up to Rs 45 lakh. The EMI for an 80 percent loan is Rs 31,000, which means that you will be paying Rs 3,72,000 in tax benefits during your first year of ownership. There are certain conditions to qualify for the tax breaks, though.
First-time homebuyers are eligible for all income tax benefits, but women can claim an additional Rs. 50,000 as a home loan principal. In addition to the income tax benefits, women can also claim an additional 2% stamp duty benefit. In Delhi, a spouse buying the home in her name pays 2% less than her husband, which is a savings of 4%. As a result, tax benefits of buying a house in India are significant.
While buying a home in India is an investment, it can also be used to offset other assets. You can take advantage of the Section 54GB exemption to offset losses on investments that you made on your new property. For example, if you sold your house for Rs 20 lakhs and kept Rs 5 lakhs, you can offset your losses on the sale against your other assets, such as stocks or gold. The LTCG exemption is applicable to residential properties and non-residential properties.
Cost
Buying a home in India is not easy. With the rising price of real estate in the country, many middle-class families have to compromise on their lifestyles to save for the down payment. Many families choose to buy a larger house, and some choose to purchase in locations that convey a superior sense of social ‘arrival’, but do not necessarily offer a better quality of life. In some cases, homebuyers settle in unsuitable locations, with poor infrastructure and water shortages. In other cases, homebuyers purchase properties in established pockets, where the value of properties is near saturation.
The cost of buying a home in India is generally between 25 percent and 30 percent over the advertised price. The fees for brokers and conveyancing, which is usually 1-2% of the property value, are not fixed. However, buyers must consider the new tax reforms and their effect on the real estate market, since they have an elevated tax mandate. For this reason, it is critical for homebuyers to factor the costs of these fees into their budget.
Other costs include parking space, which can range from one to five lakhs. Developers often allot additional parking spaces for an additional fee. For these costs, you should factor in a few lakhs to your estimate. Also, make sure to add property registration and maintenance charges. While these costs are often hidden, they are essential to the process of buying a house. Aside from the mortgage, many people buy a house through a real estate agent. These agents help them choose the right property, negotiate on their behalf, and assist in other aspects of buying a house.
Another major expense associated with buying a house in India is stamp duty. This fee is required by law and authenticates the sale agreement and acts as evidence of the property’s ownership. The fee is usually one percent or less of the property’s value. In Mumbai, this fee is as much as 20% of the property value. For example, if a house costs Rs 50 lakh, you’d have to pay an additional Rs 50,000 in registration charges.
Convenience
The Convenience of buying a house in an Indian town or city is incomparable with that of a foreign country. Buying a house in an Indian town or city will help you avoid a host of issues, including a difficult process in transferring your name to the new property. There are other players involved, depending on where you want to buy, the type of property, and the market conditions.
It is necessary to carry all required documents with you while buying a property. Many buyers may need additional documentation. Having a qualified legal advisor can be invaluable, as well as keeping track of current real estate trends. Expert professionals will make the whole process of purchasing a house easy and stress-free. For this, it is necessary to choose a team of professionals with relevant experience in real estate. The benefits of a professional team will outweigh the costs of buying a house in India.
Tax savings
Purchasing a home in India can be a great investment and can save you a lot of money on taxes. There are many benefits to buying a home, and home loans are a good option if you are unable to afford a full price up front. Tax savings can also help you lower your monthly payments on your mortgage. You can also take out home insurance to protect your property from accidents and unexpected expenses.
Home loan interest payment and repayment can be claimed as a deduction under Section 24. The limit is Rs 2 lakh per year for self-occupied residential properties. For the affordable segment, you can claim tax benefits of up to Rs 1.5 lakh per financial year, as long as the house is rented out. If you are selling the property, you should invest the balance amount into a Capital Gains Account Scheme. This way, you can claim tax deductions on both the interest and principal component of your mortgage.
Another tax benefit of buying a home is the deduction of pre-construction interest. This interest can be deducted in five equal instalments, from the year you purchase the property to the year you take possession of the property. The maximum deduction is Rs 2 lakh for a self-occupied property, and you can claim additional interest deductions of up to 1.5 lakh for first-time home buyers. This is just one of the many ways to save money when buying a house in India.
Another great way to save money on taxes when buying a house in India is to purchase a joint home loan. If you and your spouse take out a joint home loan, you can claim tax deductions on the interest and principal of the loan. This way, you can use the deduction for future investments as well. The savings can be substantial! When you buy a house in India, it is important to remember that the stamp duty charged on the property is not covered by your housing loan.
Millennials’ preference for owning a home
Millennials’ preference for owning versus renting a home in India is a result of various factors. Despite being more financially secure, they do not want to incur huge EMI burdens. Moreover, modern career patterns keep them on the move, so rental homes have become a norm in metros. Among millennials, affordability is a major concern, and a change in the attitude towards saving is another factor.
Currently, 82% of millennials in India live with their parents. This trend hasn’t diminished since the economy was opened up. Moreover, the demand for homes among millennials in India has increased over pre-pandemic levels. Moreover, more millennials in India expect to work from home permanently or regularly. In addition, the increasing sentiment towards saving and asset creation has prompted more young professionals to purchase a home.
Millennials are not committed to one geography. They prefer to stay close to their workplaces. While buying a property in a central business district can be very expensive, renting a property near the workplace is a much better option. Moreover, the rental cost is lower than EMI, which makes renting a better option for young professionals. Besides, EMI-to-rent ratio is very high in India.
Millennials are more likely to buy a ready-to-move home than other asset classes. The demand for ready-to-move homes has increased from 28% in January 2020 to 85% in May 2020, and 59% of respondents plan to buy within a year. They have been accustomed to asset-light lifestyle till recent times. By opting for ready-to-move homes, millennials eliminate uncertainty. Additionally, ready-to-move-in homes allow consumers to see the final property, check the quality and location, and even move in without any hassle. Lastly, quality projects are the ones that receive first preference from millennials.
You can cut down on rent expenses by dividing the rental between multiple tenants. For example, if a three-bedroom house rents for $2,000 per month, a single tenant may not need three bedrooms or can’t afford to pay that amount. However, a single tenant could rent a two-bedroom house for $800 per month and still have access to the common areas. You might even be able to split the utilities among the tenants.
Easier
A landlord with a two-bedroom home might be tempted to increase the rent to a three-bedroom price. This could put the landlord at a disadvantage, because a potential tenant may not be interested in paying that much for a three-bedroom home. Three-bedroom houses are also more desirable since they tend to attract families, people who need roommates, or people who are forced to downgrade.
