The need for home loans arises not because
property prices are heading north all the time but because home
loans make great sense from a long-term savings perspective. Not
only are home loans a handy tool for the common man to own a roof
over his head but they also help save money in the long run.
With skyrocketing real estate prices, people are increasingly
opting for housing loans to acquire their dream home. Interest
rates are coming down all the time and the housing finance
companies are literally falling over each other to lure the
Not with standing the tax breaks and generous lending rates, a lot
of people still can't arrange resources for the down-payment,
which comes out to be at least 15 per cent of the property value.
Taking cognizance of the situation, HFCs are coming up with home
loan products called "zero down payment loan," wherein
100 per cent funding is provided for select properties.
Even if one can afford to buy a home with one's own money, home
loans should be availed because they act as good savings
instrument. According to industry estimates, the long term average
return in investing in a home is about 20% p.a. while the average
cost of borrowing funds in the market today is about 10% p.a.
(considering all tax breaks).
For salaried employees, housing loans are the best way to avail
tax benefits. Interest payments up to Rs 1.5 lakh on housing loans
are deductible from the taxable income and there is a further tax
deduction of Rs 4,000 against repayment of principal. In case a
person stays in a rented house, the cost of the loan will be
nearly zero per cent since he will be saving a decent amount on