Perks you enjoy as a first time home buyer

Congratulations!

You have decided to become a home buyer.

It is your first time.

A wise decision to take.

And it comes with perks.

Benefits and incentives galore!

But, before that, let us look at the various home buying options available to someone who intends to purchase a home.

• Home Buying Options

1. Own Funds:

Buyers deploy their own savings or funds to purchase the desired property.

1. Home Loans:

Banks and Financial Institutions offer a wide bouquet of home loan products where the buyer can choose:

1. 1. the tenure of repayment—ranging up to 30 years in some cases,
   2. the periodicity of the repayment instalment—though in most cases, a monthly repayment schedule is preferred synchronising with monthly income flows,
   3. the rate of interest payable on the home loan—either as a fixed rate where dynamic market fluctuations do not matter, or as a floating rate where, as the very name indicates, the rate of interest depends upon the current market conditions and the policies of the lending institution.

In the initial months/years, naturally the interest component in the loan will be quite high even as repayment commences, and later on, it starts becoming significantly lower as the principal amount gets reduced. In order to make it financially viable to the home loan borrower, the total interest payable throughout the tenure of the loan (after taking into account the periodic repayment of principal through the instalments being paid) is calculated. This amount is divided by the total number of instalments to arrive at an equated interest component. This amount is added to the monthly instalment payable. This is the Equated Monthly Instalment (EMI) concept. This makes the initial instalments affordable and the later instalments easier (considering the general rise in incomes over the years).

Most of these banks and financial institutions do permit part pre-payment of the principal loan amount thereby reducing the overall interest burden. The future interest payable is reworked and either the EMI is recalculated, or the tenure of the home loan is appropriately shortened.

1. Real Estate Developers’ Payment Plans:

The promoters of the housing projects themselves extend financial assistance either by way of construction-linked plans where the buyer pays the purchase amount according to the level of completion of his home, or on instalment basis.

• Perks you can enjoy as a first time home buyer

Let us look at these, one at a time.

1. Tax Benefits:
   1. As you start repaying your home loan, Section 80C of The Income Tax Act 1961 permits you to claim a tax benefit of up to INR 1,50,000 from your taxable income.
   2. Section 24 of the same Act provides for a tax benefit of up to INR 2,00,000 on the repayment of interest on your home loan from your taxable income.
   3. You are also eligible to claim an additional sum of INR 50,000  towards the repayment of interest on your home loan.

1. GST Relief:

In case you have purchased your home through the CLSS (Credit Linked Subsidy Scheme) under PMAY (Pradhan Mantri Awaz Yojna), you are entitled to a 4% rebate on GST and will need to pay only 8% as GST instead of the present rate of 12% as GST.

In case your family’s annual income does not exceed INR 18,00,000 you are also entitled to a further INR 2,70,000/ as a tax benefit from your taxable income.

1. Relief on Subsidy Slabs:

If the tenure of your home loan falls within the 15 to 20 years’ range, you are also eligible for interest subsidy of:

1. 1. 4% if your income is < INR 12,00,000 and the principal amount of the home loan is < INR 9,00,000, and
   2. 3% if your income is < INR 18,00,000 and the principal amount of the home loan is < INR 12,00,000

1. Concessions in Stamp Duty and Registration Fees:

Some of the states in India do extend concessions in Stamp Duty and Registration Fees to first time buyers and these differ from state to state.

1. Affordable Housing Projects (AHP):

Various initiatives have been launched by the Government of India to incentivize and promote affordable housing projects across the country. These projects offer incentives like competitive pricing, subsidised interest rates, etc., to attract first time home buyers.

1. Lower Interest Rates: 

Preferential interest rates are offered by banks and financial institutions to first time home buyers through specialised home loan products where the terms and conditions are beneficial to first time home buyers.

1. Subsidised Insurance Premia:

The Credit Linked Subsidy Scheme (CLSS) under the PMAY (Pradhan Mantri Awas Yojana) Scheme offers subsidised insurance premiums to eligible beneficiaries.

1. Pradhan Mantri Mudra Yojna (PMMY):

In its own way, this scheme which offers financial assistance to individuals and small entrepreneurs planning to start businesses, including those in the construction sector, does encourage such beneficiaries to offer affordable housing options to home buyers.

Start your home buying journey with thorough research and understanding of what all you can do to your advantage to make your experience a truly cherishable one.