Last week a friend of mine called me. He told during the conversation that 'My son has been living in a rented flat in Pune for the last three years. He has saved some money and is now saying that he wants to get a flat. He is currently paying a rent of Rs 12,000 per month. At the same time, if he buys a flat up to Rs 50 lakh by taking a home loan of Rs 30 lakh, then he will have to pay an EMI of around Rs 22 thousand. You tell me what advice should I give him. My friend, as there are lakhs of people in the country, who live in this dilemma whether they should live by paying low rent or take a house by taking home loan and then pay the installment.
Let us discuss this issue through this article:
It is important to recognize the need
If you are working away from your home town or village, then you do not think of getting a house in the early days of your career. But gradually when some kind of stability comes, then you start thinking about it. To get a house you need to identify your need. If you conclude that you have to live in the same city for a long time now and you have collected margin money, then you should think about getting your own house. If you have got some kind of stability in your job and the margin money has accumulated, then you should not compare the options of living on rent and getting a house on EMI. Because buying a house in such a case is always a profitable deal.
Benefits of buying a house on EMI
Your home in India has always been called the 'dream house'. There are many reasons for this. If you take a house on EMI then your way of living becomes better. The reason for this is that you take everything from furniture to electronic equipment, thinking that you do not have to change your residence. You get the interior done in the house with this mindset. In this way, you get relief from frequent house changes because you have to incur a lot of expenses for changing the house on rent again and again. For example, the cost of packers and movers and according to their needs in a new house. You do not even have to change the address in your documents again and again. It's a very relaxing thing.
Tax exemption important
By taking a house on a home loan, you get a lot of tax exemption. After getting the possession of the flat, you get a deduction of up to Rs 2 lakh per annum in the tax liability on the interest against the loan taken on the Self Occupied Home under Section 24(B) of the Income Tax Act. Not only this, if the husband and wife have taken the house jointly and both are employed, then both can avail of this exemption separately.
Along with this, you get a tax exemption of up to Rs 1.5 lakh under section 80C on the principal amount. This means that you do not need to invest separately to avail of tax exemption under section 80C.
Appreciation in property value
If you live in a rented house for 20 years, then the rent paid for it, in a way, remains included in your expenses. On the other hand, if you pay EMIs for 20 years, then you create a property like this. If you make a bet on the right property after careful and thorough R&D, then over time you can also get a good appreciation.
Beneficial to live in such conditions on rent
If you are in a job that receives frequent transfers, then you have the advantage of staying in rent. By living on rent, you don't have much trouble in changing jobs if you find a better option in another city. This gives you a lot of flexibility. You can get the bigger or smaller house as per your requirement. If you do not have margin money or have any doubts about job security, then in such cases it is more appropriate to stay on rent.