When Mohit’s cousin bought a house in London, his lender charged just 2% interest on the home loan. Meanwhile, Mohit was paying a whopping 9% here in India. This seemed like a big disadvantage that Mohit could do little about. There are many other such benefits that foreign homeowners enjoy. Hopefully, we will get all these in India soon!
Here is a list of benefits overseas homeowners get that we don’t:
- Lower interest rate
Compared to countries like United Kingdom (2%) and Australia (4%), Indian home loan rates are quite high (9%). This pushes up the costs of the loan, and makes the property more expensive for the owner. A lower home loan interest rate is a benefit that Indian homebuyers would welcome. This, however, depends on the Reserve Bank of India. Only if the RBI cuts its lending rates can banks afford to cut loan rates.
- Tax benefits
Home loans in India do offer tax benefits. But the advantages are greater in countries like the United States. For instance, when you buy a house there, you get the following benefits:
- A mortgage interest benefit: The entire amount paid as interest on the mortgage is tax-free. This is a huge amount and, therefore, a huge benefit.
- Real estate tax benefit: The property tax paid by the homeowner is tax-deductible as well.
- Tax credits
When Mohit’s friend bought a house in California, he received a tax credit certificate. He used this to get a discount on the tax he owed the government. Indian home buyers get this too. However, Mohit’s friend also got a certificate for installing a small solar power plant in his backyard. The American government provides wonderful tax credit benefits to homeowners as rewards for being environment-friendly. India can easily get this too to go the eco-friendly way.
- Property tax waiver
In some countries like the United Arab Emirates, there is no property tax to pay. If you buy a house in Dubai, you just pay the registration fee for the property to the Dubai land department. The government will not charge you a penny extra. Now this would be a great benefit for Indian homeowners.
- Capped variable-rate mortgage
In many countries, including France and Holland, home buyers can get a capped variable-rate mortgage. This is nothing but a home loan with a floating interest rate. But there is a fixed level up to which the rate can rise. While some banks in India offer this benefit, most do not. If you opt for a floating rate plan, you could end up paying very high rates at certain times. So, the need for regulation is highly desirable here in India.
The bottom line
While buying property in India has become convenient nowadays, there is still a long way to go. If Indian homebuyers could get a few of the above benefits, their home-buying experience would improve drastically. All we can do is hope for a change to restructure the real estate market in a positive manner.