Its Time to Own a Dream Home

The Indian real estate market is on fire. The banks and financial institutes are doing brisk business finanicing the dreams of millions who want to own a house.

Given the current situation of high real estate prices and loan rates, does home buying have to be purely driven by emotions or is there adequate financial logic for purchasing your own home? Here are five compelling reasons why this is the right time to own a dream home.

Advantage from tax breaks and inflation

Tax breaks for home loans and inflation’s impact on home loan repayments are two factors that continue to work optimistically for the home buyer. Under the present tax rules, tax payer can claim rebate on interest repayments for home loans to the extent of Rs. 1.50 lakhs and on principal payment up to Rs. 1 lahk per annum.

Also, as inflation rises the cost of all other commodities, it brings down the real cost of the home loan EMI’s.

Rising salaries

As salaries continue to rise, both in nominal and real terms, this surely becomes the best time to own a house. With companies including components like performance linked pay and employee stock options in compensation packages, the effective impact of pay hike is much more.

Though estimates vary, but forecasters predict a double digit salary growth for atleast next three to four years.

Longer working lives

Increased lifespans and better healthcare facilities are helping individuals to have to much longer professional life. This means that one gets a much longer period to repay the home loan.

Appreciation of property value

As an investment, homes will continue to be as rewarding as in the past. Even if the housing prices tumble in the next few years, they will more than recover.

Experts believe that home owners will reap an annual return of 12-15 percent over the next six to seven despite short term falls.

Reverse mortgage

The great thing about owning a home is that if one is in need of money in the future, one can always unlock its value - even without moving it. With reverse mortgage coming to India, home can become a financial planning tool for ones old age.

Unlike conventional mortgage, where with every EMI paid raises the equity of the house. And once the entire loan amount is repaid the house equity rises to 100 percent. Under reverse mortgage, one pledges the house with a financing institute that pays back a monthly amount based on factors like owners age, value of the house and so on.

However, though the financial logic in favor of buying a home continues to be compelling, but one must exploit the multiple advantages to the hilt. The home buyer must be on his guard while taking a loan.