As the year passes, it showers some lessons for the new year. The year 2019 is over, look back and pick up the things that can help make 2020 a better year. The previous year witnessed several significant announcements that affected the real estate sector and the home buying process. Some of the critical decisions and events for realty sector in 2019 :
- In the 2019-20 Union budget, a surplus tax deduction of Rs 1.50 lakhs on interest paid on home loans, announced for the affordable housing segment.
- The budget stated approval for the re-investment of capital gains of up to Rs 2 crores in two homes for an individual.
- Increase in the standard deduction, from Rs 40,000 to Rs 50,000, for salaried people.
- India’s first REIT launched. Real Estate Investment Trust are securities that trade on the stock exchange like a stock.
- There is a reduction in the GST rate for residential realty.
- To ease the liquidity distress in the sector, real estate stress funds creation.
Buying a home in 2020
1. Choosing the right developer and project
Choosing the right developer and the project will be crucial for homebuyers in 2020. The developer’s track record and financial reputation, especially when one is looking at a newly-launched project, remain an essential consideration. The project should be RERA-approved and listed on the apt RERA website. Also, for an under-construction project, the financial strength of the developer is essential. So, choosing the right brand is critical. Consider the project’s completion stage and likely market response. One should be cognizant of their housing needs and not just attractive pricing offers. The appropriate developer and the right project, which is close to completion, might be expensive but will prove to be a better choice this year.
2. The market timing
The market prevails to remain appealing in terms of pricing. While ready-to-move-in properties and the close-to-completion properties remain preferred options, this list is also slightly expensive and consists of a relatively smaller proportion of the gross residential market. Therefore, one has to move faster in this chunk. Attractive offers, prices, discounts, and payment options for new launches are the norm, and they should not be the ONLY criteria for choosing a project.
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3. importance of budget over the size
Though the appropriate apartment size and configuration that serves your purpose is essential, one should also regulate due diligence of finance and budget. Make the best choice. If your budget is a constraint, seek for a starter home for smaller family size, that will allow you to buy now, and upgrade it later. Don’t forget to look at affordable homes on offer. Some private builders are targeting the middle-income class and offering decent amenities within the given price bracket.
4. Smartly choose the location
The property seekers should note that projects differ, in terms of offers, due to the site, ticket size, and specialization of the property. Properties located in underdeveloped areas witness steady growth, or the emerging regions have more attractive offers for the buyers, as compared to properties in the developed locality. Many times, even banks and other financial institutions may provide benefits in the form of a lower rate of interest for home loans, more EMI options, and flexible payment schemes to ease the buyer’s purchase experience.
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5. Loan and savings should have the right mix
A property seeker can maximize the loan eligibility, rather than depleting the savings because home loans are at their cheapest in a decade. Most banks lend up to 6-7 times the income, BUT one should not over-stretch the finances. Paying the debt after spending on household expenses, should not become difficult and should leave room for savings as well. Choosing the right product, in terms of the size, becomes paramount. In 2019, banks linked their home loan interest to the repurchased agreement rate. It is an immediate benefit when the interest rate is falling. However, if the interest rate rises, then be ready to pay higher EMIs. 2020 requires to keep track of the interest rate moving up or down.
Including the points mentioned above, one should also manage taxes intelligently to get the maximum benefit of the deductions allowed for home loans. You can take advantage of the extra tax deduction benefit of Rs 1.5 lakhs under section 80EEA, if you bought a house loan in 2019 or if planning to buy it before March 31, 2020.
