Unlock Home Finance: Insights From The Experts

Veegaland Homes | May 1, 2024

Most first-time homebuyers will have various doubts concerning the purchasing of an apartment – “Should we have the complete amount ready before buying an apartment?”, “Is the process similar to buying land?” “How to find finance support?” etc.

Financial planning is undoubtedly the most crucial aspect while you are planning to buy an apartment. Experts at Veegaland Homes – the most reliable builder in Kerala addresses some of the Frequently Asked Questions or Common concerns of first-time homebuyers regarding home finance through this blog.

Read on to gain insights, and make the homebuying process a lot more comprehensible:

Should we have the complete amount ready before buying an apartment?

It’s a Common concerns of first-time homebuyers regarding home finance, that they must make a one-time or full payment when purchasing an apartment. However, this isn’t typically the case, especially during the launch phase of an apartment project. Instead, buyers are usually required to make payments based on the construction progress, following a stage-by-stage payment schedule.

For instance, Veegaland Homes implements payment schedules tied to various construction milestones, such as piling completion or slab laying. At these stages, buyers typically need to pay around 10% and 5% of the total amount, respectively.

These payment terms are fully disclosed in accordance with the guidelines set by the Real Estate Regulatory Authority (RERA). Homebuyers can easily access this information on RERA’s official website, allowing them to plan their purchase and payments accordingly.

Buyers are only obligated to make payments based on the construction progress of their chosen apartment. However, in the case of completed projects, the full payment is typically due. Nonetheless, fully completed projects with available units for sale are rare occurrences in most cases.

How does an Escrow account help?

The necessity of an Escrow account forms part of a customer-supportive policy introduced following the establishment of RERA. It serves as a security mechanism initiated by RERA to regulate and prevent the misuse of funds by real estate companies.

Under RERA regulations, a real estate developer or company is limited to utilising only 30% of the total funds invested by the buyer. To access the remaining 70%, the real estate party must provide certification from a chartered engineer, an architect, and a chartered accountant, validating the appropriate allocation of funds to the specific project the customer has invested in.

This measure implemented by RERA ensures that the funds invested by the buyer are allocated solely for the intended project and not for any other purpose. Consequently, it is imperative for buyers to verify that the apartments they are purchasing are part of RERA-approved projects or that the builder is RERA-approved.

How to find finance support to buy a home?

Thanks to numerous banks operating in the country, there are now multiple options available for home loans.

Taking into consideration one’s profession, revenue stream and disposable income, homeowners nowadays can choose from customised and flexible finance options, after doing a thorough study of the available financial options in the market- of multiple banks.

However, this choice should only come after conducting a comprehensive analysis of the various financial offerings available across multiple banks in the market.

When is the ideal time to Buy an Apartment?

Many prospective homeowners often wait for interest rates to decrease before committing to a home purchase. However, it’s crucial for homeowners to understand that interest rates are dynamic and subject to change over time.

In the past, banks offered home loans with either fixed or floating interest rates. With fixed rates, the interest remained constant throughout the loan term, while floating rates fluctuated based on the bank’s base rate, which is linked to the RBI repo rate.

However, nowadays, most banks only provide home loans with floating interest rates. This means that waiting for interest rates to decrease may not be practical, as they can fluctuate in response to RBI policies and economic trends.

Therefore, it’s essential for prospective homeowners to focus on their financial capability rather than waiting for an ideal moment with lower interest rates.

Additionally, it’s important to consider that real estate values typically increase over time. Instead of waiting for the perfect interest rate, homeowners should evaluate their financial situation and consider long-term investment benefits.

What are the Tax Benefits of Home Loans?

The Indian government had launched certain initiatives aimed at stimulating growth in the housing real estate sector. They used to offer two types of deductions for homebuyers:

1. Deduction for Housing Loan Interests: Homebuyers could claim deductions on the interest paid on their housing loans against their house property income (Rental income) under this category.

1. Deduction for Principal Repayment: Tax deduction on the repayment of the principal amount could be claimed up to Rs 1.5 lakh under Section 80C of the Income Tax Act.

In addition to other deductions available under Section 80C, homebuyers could enjoy these benefits under the old regime income tax schemes. However, these deductions are not currently obtainable under the new tax regime.

Should I buy an Apartment or Stay on Rent?

Buying an apartment rather than renting is a trending concept, but it’s not a one-size-fits-all rule. It may offer a sense of security, but it’s not necessarily the best option for everyone.

Today’s generation, known for their mobility and flexibility, often prefer renting until they settle in one location. Buying a home might be considered post-retirement using savings or corpus funds. However, rising real estate prices necessitate careful financial planning.

Renting entails spending income without building assets, whereas investing in homeownership can lead to ownership without excessive hassle. Additionally, securing home loans post-retirement is challenging due to reduced repayment capacity. Thus, individuals should weigh these factors before making a decision.

Why should I Invest in Real Estate?

Investments typically encompass three key features: Return, Risk, and Liquidity.

Fixed Deposits (FDs) offer moderate returns, low risks, and high liquidity. In contrast, equity investments promise high returns but come with significant risks and relatively low liquidity.

Real estate investments, on the other hand, offer stable returns with low risks, historically showing no decline in value. While liquidity may be lower due to longer selling periods, the stable returns from rental yields and capital appreciation make real estate investments appealing.

Apartments are like Gold

When considering the purchase of an apartment, financial aspects are crucial but not the sole consideration. Apartments, like gold, are assets that tend to appreciate over time, making them valuable investments. However, it’s crucial to consider all factors before making a decision.

Conducting thorough financial planning is vital when buying an apartment. Researching and understanding these aspects can help you plan your finances effectively for your apartment purchase.

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