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Indian Real Estate News
The advantages of taking a home loan
Source: Jan 12, 2012
A majority of the home buyers are in need of home loans while investing in residential property. There are others who wish to invest utilising their own funds but the risks associated with certain categories of properties pose formidable challenges even today.

Similarly many people have invested in vacant plots without seeking plot loans and there are instances where their investment has gone sour. The process of seeking home loans not only assists a home buyer to tide over the financial needs but also helps him to a great extent in the due diligence process.

For instance take the case of NRIs who are away from home country and who may have to go through the process of legal scrutiny while investing in immovable property. Either they have to depend on their own relatives and/or friends or else the best way is to seek home loans because the legal cell in each and every housing finance institution and banks scrutinise the title documents and certify whether the property is free from encumbrances before sanctioning home loans to the borrowers. It is always wiser to invest in projects approved by various housing finance companies and banks as that ensures that all due diligence process has been completed. It is only recently that credit rating agencies like CRISIL had entered the field to lend credence to the project viability and capability of the developers to develop projects on time. In fact categories of star ratings by Crisil even enhance the developers' stake to command premium for their projects.

Tax planning

From the tax planning point of view as well, it would be worthwhile to invest in housing by seeking home loans. It is also equally beneficial for those who have the investible surplus to invest in residential property by seeking home loans. This is because interest outgo on the loan upto Rs 1.5 lakh is tax deductible for self-occupied houses. This would mean a tax saving of nearly Rs 45,000 per individual. A housing loan of Rs 18.75 lakh would attract Rs 1.5 lakh interest at present. The interest payment can also be adjusted against the income from salary, business or profession or any other income. What is more loans can be taken from any person including banks, financial institutions and relatives or friends.

There is no limit on the deductibility of interest in the case of let out premises and commercial properties. It is advisable to seek home loans especially when properties are to be let out. So one can take as much loan as one can obtain from the lending institution. Here again the interest payment is allowed as a deduction in full while computing income from house property.

Further, capital repayments are eligible for deduction under section 80C within the overall aggregate limit of Rs 1 lakh. Payment on account of stamp duty, registration fees and other expenses which have been incurred for the purpose of transfer of such a house would be available for deduction.

Even while making joint investments in property, every member enjoys a special deduction in respect of interest on loan and also repayment of loan. From the point of wealth tax planning as well, one property is exempted from the purview of wealth tax irrespective of the value of the property for every individual. So be wiser and seek home loans while investing in immovable property.

Tag: Real estate in india, property in india, indian properties
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