Everyone cherish the desire of owning a piece of sky. A place to call home and live the moments with the loved ones. This year budget has been quite aligned to take care of the basic requirement of a peaceful life. Yeah, you are right…residential homes are made within the reach of common people.
The basic pre – requisites for an affordable housing is lower home loan interest rate and housing prices within the reach of the mass. Till date, the socio – economic factors were always in the favor of the affluent class with higher disposable income. But this year budget has turned the table ensuring the correction of real estate prices.
The primary influencer is the revision of the tax benefits of second housing. In Mumbai and other Tier – I cities, there have been more than 100,000 pads which are lying idle as they are out of the affordable reach of the commoners. The builders were apprehensive about the correction of the price because they assumed a chance of property bubble to burst. But the present scenario has left them with no option. Though it is too early to predict about the explosion of the bubble, but definitely corrections in real estate industry is in the cards.
Previously, the entire interest on 2nd housing loan was exempted from income tax. Thus the influential class preferred to take the advantage of the tax benefits by opting for loans. Assuming a person has taken a loan of 50 lakhs @ 10% interest, the interest will be approx. 5 lakhs a year and the entire interest was exempted. For 30% tax slab this was a tax saving of 1.5 lakhs of tax (5,00,000 * 30%). From next year the same exemption is capped at 2 lakhs. As a result, a lesser amount of tax will be saved (60,000 as per above example), discouraging investing in property as a tax saving instrument.
Moreover, the home loan interest rates are getting lowered, which implies that the salaried class has a breather in terms of repaying the loans. People can easily fit the EMIs within their monthly expenses.
With the effect of demonetization to ease the inflation consistently, the housing loans interest has been reduced to 8.5% from 10.5% over the last two years. Moreover, the infrastructural progression is also contributing optimistically towards this scenario, since it would enhance the connectivity between the city and the suburban areas. Not only the cosmopolitan cities like Mumbai or Bangalore, this will have a very positive effect in Tier – II and Tier – III cities.
With all the socio – economic factors in your favor, the market connoisseurs opine that; perhaps this is the time when you should start planning to make provisions for your dream home.
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