Benefits for first-time buyers

Amit Sethi

People often think that it is better to use own funds instead of borrowing, but when it comes to buying your first home the reality is you get lots of benefits while buy it against home loan. 

The most important benefit of buying a home on loan is that you get the purchasing power to buy a property that otherwise might not be affordable for you. With the ever-increasing property prices, home loan offers us a chance to book that much-awaited home and make sure that you can take advantage of a reasonable priced home. 

Tax benefits of buying a home on loan

According to experts, a tax deduction of the amount of interest paid on a home loan is available from your taxable income under Section 24. This can be claimed as a loss from house property income and can be adjusted against income from other sources like salary, business, profession etc. The amount of deduction is capped at Rs 2,00,000. 

In case you have booked a property under construction and are already paying interest on your loan, then this interest can be accumulated until the year in which you get the possession of the property. This can be claimed as a deduction in 5 equal annual instalments from the year in which you get the possession of the property. 

A deduction for repayment of the principle amount of loan is available under Section 80 (C) up to Rs 1,50,000. A deduction of the amount paid as stamp duty and registration charges paid is also available in the year in which you book the property under construction or buy it in case of a ready possession property. This deduction is available in the year in which this amount is paid. 

Subsidy benefits to first-time home buyers

"In line with the headline mission of the Government for 'Housing for All by 2020', the Prime Minister has recently announced interest subsidy of 6.5%, 4% & 3% for loans being availed of up to Rs 6, 9 & 12 lakh, respectively on purchase or construction of a house and/or enhancement of a dwelling unit", explains Sachin Chaudhary, Executive Director, Indiabulls Housing Finance Limited.

"This is a welcome move as this brings a large number of first time home buying Indian families under the ambit of Government housing schemes. Further, the loan tenor too has been increased from 15 years to 20 years. Considering an interest rate of 9 per cent and loan tenure of 20 years, an amount up to Rs 2.4 lakh can be availed as a subsidy to the eligible first time home buyers. 

This amount, once approved by the nodal agency (NHB in case of Housing finance companies) is released and transferred to the borrower's account. 

This leads to a reduction in monthly EMI outgo for the borrower (Reduction of approx. Rs 2000-2200 p.m.). Alternatively, the borrower can choose to keep the EMI same and opt for a reduction in balance tenor which helps in closing the loan faster", opined Satish Kotian, COO - AHFCL.

Fast Facts

Following are some other important advantages 

• Long tenure being offered for up to 30 years makes EMIs lighter on pocket. 
• Flexible repayment options help in making home loans more affordable. 
• Banks conducts due diligence before allowing loan, therefore it helps the home buyers from the fraudulent sellers to some extent
• You can leverage on your existing financial capacity to buy a home, which worth much higher than what really you can afford with your own money.