Investment Corner

Helping you gain insight and take the right decision.
If you are planning to invest in a home, you must know about the various home loans options, processes and issues that could occur. Also, you would need to understand how to choose the right home loan for yourself so that you may have a great home buying experience. There are various types of home loans available.  Firstly you need to evaluate which type of home loan would be more advantageous for you.  You may choose from home equity loans, home purchase loans, home extension loans, home improvement loans, land purchase loans and mortgage loans.

Before you choose a home loan you may consider the following points –
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  • Understand the property type for which you seek the loan.
  • Find out the loan tenures offered by different financial institutions.
  • Consider the no penalty option wherein you pre pay up to 25% of your loan every year.
  • Decide between opting for fixed or floating rate home loans.
  • Seek the advice of a professional home loan expert to understand all the clauses well.
  • Know your rights and tax benefits under the Income Tax Act, 1961.

Tax Benefit on Home Loan: Section 24, 80EE & 80C
Did you know that you can avail tax benefits on your home loan?  Understand your rights and benefits under the section 24 when availing your home loan. Repayment of home loans can be divided into two sections for better understanding.

  • Repayment of the Principal Amount
  • Repayment of the Interest on Home Loan

These represent two different sections of the Income Tax Act and are claimed as tax deductions under different sections while filing Income Tax Return.

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Repayment of the Principal Amount
Under Section 80C of the Income Tax Act, the amount paid as Repayment of Principal Amount of Home Loan by an Individual is allowed as tax deduction. The maximum tax deduction allowed under Section 80C is Rs. 1,50,000. However, tax benefit of home loan under this section is allowed only after the construction is complete and the completion certificate has been awarded. No deduction would be allowed for repayment of principal for those years during which the property was under construction.

Repayment of the Interest on Home Loan
Under Section 24 of the Income Tax Act, tax benefit on home loan for payment of interest is allowed as a deduction. The income from house property shall be reduced by the amount of interest paid on home loan where the loan has been taken for the purpose of purchase or construction, repair or renewal or reconstruction of a residential house property. The maximum tax deduction allowed of a self-occupied property is subject to a maximum limit of Rs. 2 Lakhs.

When you invest in a house, in addition to the cost of the house, you have to pay stamp duty and registration fee. In case you avail a home loan for the same, the stamp duty and registration charges can be included in the loan amount, provided the value of the property is up to Rs.10 lakh.
Stamp duty is paid so that the property is transferred in the buyer’s name and the property’s documents are registered. Stamp duty varies from state to state and registration cost is typically 1% of the value of the property. Stamp duty is usually in the range of 4-10% of the value of the property.  It is preferable if you avoid taking a loan for stamp duty and registration fees.

Stamp-Duty

Mumbai being the financial hub of India, the migration from other states to the city is spirally growing leaving limited space for accommodation. Being an island city, the scope of expansion in Mumbai is only vertical and not horizontal. Also, availability of open areas is scarce, thus schemes like Redevelopment & Slum Redevelopment are new avenues to create additional accommodation for the growing population.

We at Paradigm Realty are versatile in creating housing for classes as well as masses. Real estate investment in Mumbai presents great opportunities for returns. We are a NRI savvy company offering investment options in Mumbai district. For NRI’s, Rupee as a currency, is a prospective investment too, considering the current macroeconomics of peaking dollar index and robust economic growth of India. FDI investments are expected under Make-in-India initiative gradually resulting in cut-down of import bill, thus lowering the current deficit of our country and offering an avenue for rupee appreciation.

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