The main objective of the Government through housing finance in India is to encourage the development and construction of more houses. There are several benefits of constructing or renovating a house. In addition to providing a residence for the underprivileged, it can increase the demand for various raw materials in the economy and simultaneously provide tax benefits to its assessee.
What are the advantages of housing finance in India?
The main advantages and necessities of housing finance in India are as follows:
- Due to the construction of more houses, various industries like cement, brick, iron, electric appliances, glass, sanitary products, etc., are in demand.
- With the construction of more residential properties, the Government is also bringing much development to the infrastructural facilities through better roads, hospitals, 24×7 electricity, proper transportation, etc.
- Home finance facilities are helping in the re-building and expansion of run-down houses, along with the remodelling of many old existing houses.
- One of the main benefits that housing finance in India is providing is the popularisation and vast production of non-conventional energy resources like solar panels, biofuels, etc., due to modern housing facilities.
- Among all other financial services, it creates employment both directly and indirectly.
- Develops and maintains rural areas, as labourers do not have to migrate to urban areas in search of work.
- Housing finances also reduce congestion in the urban area as with this one can get a residential place in the suburban and rural areas.
- The improvement in housing facilities also reflects the improved culture of the country.
What are the tax benefits available on housing finance in India?
The Government of India, in order to encourage more construction of houses and investment in residential real estate, has introduced several tax deductions. These tax benefits available on housing finance in India under the Income Tax Act 1961, are as follows:
- If a home loan is availed for house renovation work, a tax deduction of Rs.30000 is allowed to the assessee or loan borrower.
- When a housing loan is applied for house construction purposes, a tax deduction of Rs.2 lakh per year is applicable to the loan borrower or assessee. This has been stated under Section 80C on the loan principal paid.
- Another deduction of Rs.1.5 lakh is available on home loans for the construction of a new property under section 80 EEA. This is applicable after the borrower starts paying the loan EMI.
What are the steps to avail a home loan?
The step-by-step processes to avail housing loan are as follows:
Step 1: Go to the online portal having the home loan application.
Step 2: Search for the application form and click on ‘Apply Now’.
Step 3: Fill in the basic details like personal, contact, financial, and other.
Step 4: Generate OTP via contact number or email for verification.
Step 5: Enter the required loan amount, rate of interest, and tenor after estimating it using an online home loan calculator.
Step 6: Submit this form and wait for approval, to get the loan amount disbursed.
What are the interest rates available on home loans?
The interest rate on home loans is as follows:
- For salaried individuals: 8.6% to 14%
- For self-employed individuals: 9% to 14%
These rates vary among financial institutions and are subject to change based on several factors.
What are the eligibility criteria for a home loan?
The home loan eligibility criteria are as follows:
- Nationality: Indian and non-NRI
- Age: 23 to 63 years (for salaried individuals) and 25 to 70 years (for self-employed individuals)
- CIBIL score for home loan: 750 and above
- Employment: minimum 3 years (for salaried individuals) and minimum 5 years (for self-employed individuals)
Hence, borrowers should meet the eligibility criteria and avail of a home loan of the desired interest rate. Even if one does not purchase a new residential property, housing finance in India still provides loans for renovation purposes.