5 Myths of Purchasing Residential Real Estate

It was the year 2016 that can be called the ice breaker for Indian real estate, but especially for Residential Real Estate. The RERA Act (Regulation and Development Act) in 2016 and the introduction of GST (Goods and Service Tax) in 2017 proved to be a boon after a very disheartening lull. India is finally seeing a happy phase in the housing sector.

The government responsible for some path-breaking work has developed policies that are very encouraging for the serious buyer as well as the seller. For e.g. The GST brought in some much-needed transparency in accounts. The GST council also eliminated the Input Tax Credit leading to a positive sentiment.

But what looks so green may not be, just yet. The buyer is vary of the unstable market and has doubts regarding investing in a home. Let’s take a quick look at what seems, and what may be.

1.   Buying a house in a tier 2 city is not the correct decision.

Well, it is actually the other way around. From an investor’s point of view, it makes sense to invest in Residential Real Estate in a tier 2 city as the market is cheaper than the metros hence the rental yields are better. The government is making a paramount effort to bring these cities at par with the metros to prevent migration. The mall culture, overall better infrastructure and many more job opportunities ensure a better lifestyle compared to the competitive and stressful lives of the metros.

2.  Buying a property in India is a cumbersome process.

The RERA has chalked out specific rules and regulations especially for the Residential Real Estate buyer, to secure him and help him understand his rights better. It has stringent and clearly explained mandates for the builders. Registration of project completion and occupational certificate are also covered under RERA. It has even created the Real Estate Authority where a buyer can go and complain about his grievance. Overall RERA has looked into cushioning the buyer well and ensuring buying property is a better experience for him. 

Also, the government, as well as the private sector, has facilitated easy housing loans and EMI schemes so as to promote Residential Real Estate Investment.

3.   One should not buy a house in the current market situation.

According to common sense yes one should not invest in Residential Real Estate during a slowdown. But if you think about it, it is most lucrative to invest in a property during a slump for obvious reasons. Prices of houses and the rate of interest are significantly down. 

Real estate over the years has always shown capital growth, besides it doubles in value as compared to other investment plans. It is one of the most tangible assets to own. Investing in Residential Real Estate also has an added advantage to it which most other investment schemes don’t offer and that is you can lease out your investment and earn good rent. 

The most important aspect is that your property can also be leveraged or hypothecated in stressful times or you can even have a tenant and not lose your property.

4.  Renting a property is better than purchasing.

Yes, buying a house can be a massive expense where you end up putting all you have earned and saved over a long time. But there are innumerable benefits of buying a house vis-à-vis living in a rented one.

  • Investment in Residential Real Estate means lifelong security.
  • In distressing times, it is one of the most bankable assets. 
  • The returns are higher than the investment always. 
  • You will never have to surrender a premise you made your home out of. 
  • You will not have to deal with the ever-inflating rentals. 
  • A property can become your second source of income and can be your retirement plan. 
  • When you live in your own home you are more in control of your life. Rented premises always come with interference frill. 
  • Buying a home can be very expensive but in the long term, it turns out to be cheaper than renting one.

5.  You will have to spend from your contingency funds even after you avail of a home loan from your bank.

If you are planning to buy a house and are looking for a home loan then you are obviously calculating the high rate of interest you will be paying to the banks, which sometimes ends up being more than the principal amount. 

Well not anymore. The government is offering excellent down payment and EMI schemes for Residential Real Estate investments especially with the middle segment in mind. The interest rates are incredibly low and real estate is tax-deductible which will help you save a lot eventually.

You can also consider going to Non-Banking Housing Finance Companies which have far more relaxed interest rates and also offer a higher quantum of loan. There are many nonprofit making organizations and house finance companies that help you secure a housing loan at almost zero percent interest. Do your research well and you are good to buy your very own home… stress-free.

We Take Care Of Your Down Payment Needs And Would Love To Help You Fulfill Your Dream Of Buying Your First House! 

Declining GST Rates for Residential Real Estate

Residential Real Estate to Benefit from Home Loan Subsidies and GST Rates

Understanding the annual financial budget with all its changes is vital especially if it helps you save a substantial amount of money. The Finance Ministry has most definitely made history but let us look at some of the finer points with regard to the Residential Real estate sector.

An Additional 1.5 lakh Savings Per Year

When buying a home, we need to keep in mind that the budget 2019 has added a number of tax benefits when it comes to residential real estates. As the government works towards the “housing for all” by 2022, our finance minister proposed an additional tax benefit of ₹ 1.5 lakhs on home loans taken in order to purchase an affordable house up to the value of ₹ 45 lakhs. With previous budget deductions under section 24(b) which provided benefits up to ₹ 2 lakhs, the overall tax benefits for home loans taken on affordable housing has increased to ₹ 3.5 lakhs. For the industry, this move hopes to increase property sales by encouraging people to invest their earnings into a new home.

Side Notes:

This is an additional step to ensure property security to give the borrower benefits of invested equity in case the market price of the property reduces.

This new tax benefit is available on home loans taken from a bank. The benefits are thus only valid up to 85% of the home loan, setting aside the margin money. Therefore, even though the price of the property may be around ₹45 Lakhs, the maximum home loan eligibility from the lender is ₹ 38.25 lakh.

This benefit looks great, though the reality is that with reduced lending rates the amount received in tax benefits will be less than ₹ 3.5 lakhs and further reduced yearly.

1. Attention To Housing For All By 2022

So, you have the money, where do you invest it?

Adding focus to their target of ‘Housing for all by 2022’, the government through the Pradhan Mantri Awas Yojana (PMAY) has sanctioned around 81 lakh houses in the PMAY scheme in the urban area and another 1.95 crore homes that are in the process of construction under the PMAY in the rural area. With the newly added exemption, ₹ 3.5 lakhs in income tax on home loans under affordable housing in this budget will work with a broader segment of home buyers and indirectly increase demand of residential real estates.

‘More savings means more investments’.

2. Reducing corporate tax

With a 25% cut in corporate tax on companies with turnovers more than ₹ 400 crores, the government remained mindful that such a cut would help the economy grow. 

3. Benefits for Non-Banking Financial Institutions

The budget outlined measures especially for the revival of NBFC. Because of the ongoing debt crisis and liquidity crunch, a one-time, 6 – month credit guarantee for the purchase of pooled assets. This includes only highly rated NBFCs and up to ₹ 1 lakh crore.

This nudge from the government will help with the revival of lending activity and also provide a sustained flow of capital. A much-needed boost to the liquidity of NBFCs by the government allows FIIs and FPIs to invest in debt papers of NBFCs.

4. Reduced GST Rates as per the GST Council

In March, the GST council propelled the real estate players to adopt 5% GST for residential buildings and 1% GST for affordable housing without any benefits of input tax credit (ITC). This move has helped boost the residential real estate sector, offering buyers a cleaner and more pleasing set of numbers when they purchase their new homes.

Other Benefits For The Residential Real Estate Sector:

1. The Development of Infrastructure

The Finance Minister stated that an investment of ₹ 100 lakh crores in infrastructure over the next 5 years will help improve connectivity throughout the country, with better roads, metros, railways and airports on the line; the proposal of ‘One Nation- One Grid’ will help in new residential projects in all major metropolitan cities around the country in improving the residential real estate sector.

2. Development of Skills in the Residential eal estate sector and others

It is important for real estate agents and brokers to have a vivid understanding of the schemes, projects and benefits that the government has developed for the growth of the sector. The vision is to train a total of 10 million young employees in the industry-oriented training. Acquiring skill sets in AI, big data, VR, 3-D printing, etc, will not just add meaning to the life of the youth but also to the growth of the country and will give them the salary to invest in the residential real estate sector.

For more details on how you can get started on your down payment, Contact Home Capital

5 tips for Home loans

5 Ways real estate investing will help you in your 50s

When you’re 50, what do you imagine your life to look like? A family, a Tesla or booking that amazing home stay on Airbnb? All these are bucket-list must-haves but haven’t you forgotten you need a place to live? A roof above your head?

Investing in real estate early in life can help set you up for life. Taking the risk at twenty may seem like a difficult task and a risk for many. There is however one rule of successful investments, that is to start as young as you can. And who knows, by the time you turn 50, a home will be all you need. This will also give you the opportunity to further invest in a rental property and help you establish a steady flow of income once you have retired.

So we mapped out a few reasons to consider investing in property both commercial and residential from an early age. It is never too early to start!

You Can Avail Home Loans Easily

The trick of controlling home loans is paying them off, one at a time. Whether you buy a home now at the age of 30 or at 50, you may take a loan to purchase the home. However, you have a reduced time frame and may end up eating into your savings at a later period. As you work your way up the job food chain, your salary increases, you can pay off the loan in lump sums and also have the benefit of a healthy CIBIL score.

Learn How To Be Financially Independent

You learn to work with the salary you are currently earning and as that increases over time, the loan disappears but you have learnt to save money. This helps you invest in other ventures, working on creating a good CIBIL score. By the time you turn 50, you will be providing for a family, children, your parents and having a home at this point will be beneficial for a stress-free retirement.

It isn’t about taking a risk anymore but more of planning a constant cash flow for you and your family through either rental or commercial real investments.

A lesson in credit management

It is easier to handle credit at a younger age. Nobody expects you to be successful at the snap of your fingers, and you are given the benefit of the doubt. Dabbling in property investments will help you acquire the knowledge needed to manage future investment risks or even personal risks. It is even lighter on your mind when you have no family to care for but yourself. Take that leap of faith now! You can turn back if it doesn’t work out. To invest or not to invest? That is the question at stake. Investing in either an SIP or mutual funds or the stock market will not be new to you when you grow older. You will learn to decipher between a good investment and what wasn’t and why. Learning from such experiences make real estate investing a great idea at a young age. Real estate investing requires time, the ability to adapt and of course the ambition to make it work well.

You can personalize your real estate investing pattern

You set your rules for your investment. You can pick what type of real estate investing pattern you want to look at. You set it up at your pace and change as you go along. You can even pair up with a partner and together work towards a greater goal. Rental properties are an awesome investment. They allow you to retire early. It may not make you rich instantly, but it will help you grow and maintain constant income overtime.

You Have The Advantage Of Time

Your greatest advantage is the fact that you have time. Time to build your credit. Time to make bad investments. Time to re-sell your apartment for a bigger one or smaller one. The possibilities with real estate investing opportunities are limitless and as you grow in your career, you will earn more and save more. Let’s say you start to invest in your early 30’s. You will have 30+ years to repay your loans. The time frame also makes you eligible for long loan repayment periods with low interest rates.

Over time we see real estate owners both commercial and residential gain equity. The younger you start investing, the more equity builds up. This also adds to your net worth.

Have we convinced you to take the plunge? Let us also help you with your down payment.

Saving for Home Down Payment

7 Smart Income Tax Benefits To Take Advantage Of With Your Home Loan

The word taxes has always been associated with what benefits you can gain from them. So when it comes to buying your dream home, the Indian government has especially with the last budget is encouraging citizens to invest more into buying their first home.

Did you know that your Home Loan is eligible for tax deduction under section 80C? So while you may be paying interest on the money you’ve borrowed from your bank or NBFC, you also have the option of multiple tax benefits to reduce your outgo on your taxes. Schemes like Pradhan Mantri Jan Dhan Yojana are helping develop the housing sector in India. These schemes strive to reduce the problems of affordability and accessibility. Let’s map out the different sections that you can apply for a deductions.

Interest Deductions

These are one of the tax benefits that one can avail on their home loan. These yearly deductions are related to interest paid on a property loan. If the property under question self-occupied, an individual is allowed to claim a maximum deduction of Rs.2 lakh under Section 24. This Rs.2 lakh deduction is applicable only when the property is completed for construction within 5 years from the Financial year in which it was started.

If the construction on the property is not finished within the mentioned 5 years, your claim is reduced to only Rs.30,000. So, if your loan was taken on 30th April 2016, the construction of the property should be completed by 31st March 2022. If the property is being let out on rent, the buyer has the ability to claim a limitless amount that was paid to the bank as interest.

An individual can claim the amount spent as interest if the property is given out on rent. However, This doesn’t take into consideration a completed project or an under-construction one. But, the overall loss that is claimed is restricted to Rs 2 lakh under the head of House Property. This Deduction can be claimed from the year in which the construction of the house is completed.

Interest Paid Towards Home Loans During Pre-Construction Period

If you have invested in an under-construction property and have not resided in the home as yet, you continue to pay the EMIs. Your ability to claim deductions start only when the property is fully constructed or you invest in a recently constructed home.

You can still enjoy deductions before the completion of your home. Pre-construction interest helps out in situations like these. The income tax law states that interest paid during the pre-construction time can be claimed as a tax deduction in five equal instalments. This is from the year in which the construction of the property is completed. The maximum amount, however, remains capped at Rs 2 lakh.

Repayment On Principal

In tax benefits under Section 80C, the principal portion paid as the EMIs for the financial year is deductible. The maximum amount that one can claim goes up to Rs 1.5 lakh. One setback with this structure is that the house should not be sold within 5 years of its possession, otherwise, the amount that was deducted is added back to your income in the financial year that the house was sold.

Repayment On Stamp Duty and Registration Charges

Under section 80C, a deduction on stamp duty and registration charges can be claimed within a limit of Rs 1.5 lakhs. But can be claimed in the year that the expenses happened.

Under section 80EE

Under Section 80EE there are additional deductions that are allowed for home buyers up to a maximum of Rs 50,000. To claim this deduction, the amount of loan should be Rs 35 lakhs or less and the value of the property should not exceed Rs 50 lakhs. The loan should be sanctioned between the period of 1st April 2016 to 31st March 2017. The individual does not own any other house at the time the loan is granted. Section 80EE was reintroduced effectively from the Financial Year 2016-17 and the earlier deduction was allowed under Sec 80EE and was made available for 2 years, namely the financial year 2013-14 and the financial year 2014-15.

Under section 80EEA

The budget 2019, further introduced an additional deduction. Under Section 80EEA, home buyers are allowed a claim upto a maximum of Rs 1,50,000. The stamp value of the property should not exceed Rs 45 lakhs. The loan should be sanctioned between 1 April 2019 to 31 March 2020. The individual should not own any other house at the time of sanction of the loan. The individual must also not be eligible to claim deductions under section 80EE.

Joint Home Loan

A home loan that is taken jointly, the co-holder of the loan can claim a deduction on interest up to Rs 2 lakh each. Principal repayment in this case under section 80C can be claimed up to Rs 1.5 lakh each individually. They must also be co-owners of the home that the loan is taken on. So a loan taken jointly by a family can help claim a bigger tax benefit. Let’s say you are a co-borrower as well as the co-owner of the house, you can each claim up to the maximum deductible amount under this section.

Understanding these tax benefits will make the home buying a much easier decision. So if you are ready to buy a home, we’ve got your down payment covered.

Rent vs buy

Rent vs Buy: Here are 6 Factors To Help Your Evaluate Your Decision

Buying a house versus renting is an age-old debate, especially with the way the real estate industry has been functioning for the past year. It is important to determine the income of the family before you take the first steps towards buying a home. Here are a few points that will make you evaluate your decisions and help you work towards buying a home. Rent vs Buy: here are a few reasons why the latter is a better option.

Buying Is Cheaper Than Renting

Buying a house may be more expensive at first. However, in the long run, it actually helps you save more than when you rent a home in the long run. But you must also play your cards right. We all agree that property prices have spiked by 11.59% in the past year, but we also need to take into consideration the fact that even rent rates have increased by 9.79%. Although you may start at a lower rent rate with time in India, the applicable rate of rent increase every two years is around 10 % for residential properties.

Though rent adds up to more in the long run, buying a home is not cheap. First, you will still have to put in a 5-20% down payment when you buy a home. You will have to look into home loans and work with EMIs on a monthly basis. Eventually, that will eat into your savings but once you’re done with your home loans you need not worry about it anymore. Paying more upfront is better than constantly having to pay. So we see the balance tilt a bit in favor of buying a home here.

Time For Saving Up

You know that 5- 20% down payment you need to look into. Have you looked at options for paying it? We can most definitely help you with that. But eventually, everything that is borrowed from lenders needs to be repaid, so that it does not harm your CIBIL scores or credit scores in any way.

In order to do so, you will be forced to be disciplined about where you spend your money so you can reach your goals. Experts say that being a homeowner makes you more responsible, both financially and on the personal front. It will help young adults and millennials get their act together as dates to pay off your EMIs draw closer.

Personalizing Your Home

Honestly, as a person who rents, you are living in somebody’s home. You need to respect and understand their home. You are subject to petty rules and there are times the ambience doesn’t fit your personality but more of your budget.

When you buy your own real estate property, you have control over things like redecorating, remodeling and making the place your own. If you are one of those dreamers fantasize about customizing your own dream home, being a homeowner is the only way that can happen.

Your Home And You Will Appreciate In Value

The real estate industry may seem to be a bit on the tough side of investments when it comes to appreciation in value. But it is also one you can bet on to increase over time. With good research, you could purchase a home whose value will increase each year that you own it. Though urban cities like Mumbai, Delhi, Bangalore have seen a slow rise in property prices, many other developing ones like Pune, Indore, Lucknow, Hyderabad are also great places to buy your new home with the rise in employment and development of the areas.

Buying a home also increases your net worth. Though you may already invest in SIPs, mutual funds or the stock market, this will add to your credibility financially.

Adds Stability To Your Life

When you buy a home you have taken a huge step towards settling down. You are building a relationship with the people in the community where you’ve bought your home.

Homeowners have a greater sense of stability especially when they settle into their first home. They also add to the stability of the neighborhood. In many areas with high rental properties, it gets hard to know neighbors or trust someone with your mail or pets. If you are looking for stability and a good neighborhood, homeownership is something you should look into.

Adds Security To Your Life

Homeowners do not have to go through an eviction notice from landlords. Your home is yours until you decide what to do with it. If you have an extra room you can even put that up for rent. Being a homeowner means you have a permanent address and will never have to move because of factors not in your control.

In a developing country, it is important to look at affordable cities to live in. However, if you have already set up shop in a city, here is how your city ranks in the rent vs buy debacle.

Affordable cities to buy a house

  • Indore
  • Jaipur
  • Ahmedabad
  • Lucknow
  • Kochi
  • Hyderabad
  • Kolkata
  • Bengaluru
  • Pune
  • Chennai

Affordable cities to rent a house

  • Indore
  • Lucknow
  • Jaipur
  • Kochi
  • Ahmedabad
  • Hyderabad
  • Kolkata
  • Chennai
  • Pune
  • Bengaluru

So if you do decide to buy a new home, let us help you with getting your down payment on track.

6 tips to manage home down payment in India

Your down payment is the first step towards your new home. On average, a home down payment is anywhere between 5% to 20% of the value of the property to be purchased with the rest of the money based on housing loans. It is important to plan ahead to make your down payment.

We look at 6 ways to manage your down payments and live life at the same time. Don’t let life come to stand still for the sake of property investment.

Set A Budget & Time Period

This is where research comes into play. Look at the locality you want to buy your house in and determine the property rate. Then map out how much you’ll need for your home down payment. Divide that number by the time you’ll need to save up. You will be able to create a realistic budget to help you graduate from a person who rents a home to a homeowner.

Get a Separate Savings Account

Keeping the money aside will prevent you from tapping into it. It is now possible to put a transfer monthly directly from your checking account without missing any month. Forgetting to keep aside money will not be a problem and saving will be a breeze for you. When it comes to Non- Banking Financial Corporations, SIPs and mutual funds are also great options to invest in, in order to save up for your future down payment.

Manage Monthly Expenses Through Further Research

You may have phone bills, health insurance, car loans or EMIs on your list of payments every month. These will continue to dig deep into your pocket. Looking around for better deals, reduced rates and prices will help manage your down payment. As borrowing rates decrease there will be a difference in EMI rates across banking institutions will also fall. Keep a keen eye on the changing nature of banking institutions.

Keep A Tab On Your Spending

Online transactions have made spending so much easier. With wallets, UPI and online banking driving the present towards a cashless society, it is also difficult to keep a check on spending. Use these tools to keep a check on your expenses. Keep checking your account to highlight those areas where most of your money is spent. Set a budget aside. Limit nice meals to a minimum number of times in a month or take fewer vacations. It may seem a task at first, but this mindfulness will turn into a habit and you will be able to continue such habits for the future with your housing loan as well. This is practice before the EMIs roll in.

Home Buying Schemes In India

Different states have different schemes for houses and homes for first-time homebuyers and investors. For example, the affordable housing scheme is a recent proposal that makes buying and investing in property easier for people in lower-income brackets and mid-income brackets. Their goal is to make homes more affordable for the masses and bridge the demand-supply gap in the real estate world in India.

When You Save An Amount Of Money, Reward Yourself

  • Let’s say your down payment is about Rs 1 Lakh. Every time you save an amount of Rs 25,000, treat yourself to a small lunch or dinner to make saving a milestone to accomplish. So every time you save an amount that gets you closer to your down payment, take a small break. Soon saving will not be as bad as it sounds. It will also make you work hard towards promotions and better opportunities in your career.
  • Look at arranging for your down payment as a financial goal. This will be a great milestone towards starting a life based on savings and working toward your new home. Present generations find it hard to buy homes especially in the recent markets and prefer to rent out rooms and adjust in co-living spaces.
  • The high price, however, is not the sole reason for the ignorance in housing. Credit cards and wallets allow present generations to swipe first and then pay later. With the bills mounting up, home buying is not a reality to many of them. Home buying includes the ability to provide a sum of money before all the home loans come into play. This will make the whole home buying process a little less stressful.

With all that being said, buying a home is now more convenient than it was five years. HomeCapital can assist you with an interest-free down payment scheme to make your home buying process a pleasant one!