Recently, the finance minister has announced that for home loans, there will be a further relaxation in rate of interest up to Rs. 1 lakh. Of course this is no big news for people planning to buy houses in Delhi or Mumbai. The price of any real estate property in the big metros is far beyond this limit. However, it will indeed increase the demand for home loans in the 2nd or 3rd tiered cities like never before.

What are the Conditions for getting Home Loans in the Sub urbs?

However, there are certain conditions that need to be fulfilled before availing this scheme of additional relaxation.

1. The primary requirement is that the loan should be the borrower’s maiden home loan and that the amount borrowed should not be more than Rs. 25 lakhs.

2.The second condition is that the total price of the residential dwelling property shouldn’t go beyond Rs. 40 lakhs. The applicant should also not be the owner of any residential property on the date of loan sanction. This will work as a disqualifying factor.

Moreover, the loan should be granted by the bank or finance company within the period of April 1st, 2013 to March 31st, 2014. A new section has already been added in section 80 EE of the Income Tax Act by means of which, the 1st time home loan takers will get a concession up to Rs. 1 lakh, on their interest amount.

Relaxation on Income Tax

This additional drop of Rs. 1 lakh in the home loan interest amount can be claimed for the assessment year 2014-2015. If the 1 lakh margin is not reached during that term, balance may be carried forward to the next term i.e. 2015-2016. The finance minister has also announced that this concession actually excludes the deduction of Rs. 1.5 lakhs granted to self-occupied properties under section 24 of the Income Tax Act.

Those who are wishing for a house in Mumbai need not feel too disappointed! They can easily go for houses in Kharghar, Virar, Nalasopara and Thane— all in the suburbs of Mumbai and therefore, not very far from the metro city itself. In fact, many people are buying property in these areas since there is a high possibility that the market value of land and property in these Mumbai suburbs would go up in near future. So,even if you don’t want to set up your home there, it’s at least a good investment option. Moreover, this new scheme will also aid in tax saving for up to Rs. 30,000, for a maiden borrower. This is totally unprecedented in the history of home loans.

Rise in the Demand for Home Loans in The adjoining Towns of the Metro Cities

Needless to say that the announcement of this scheme has created a rush of demands within the tier I and tier II cities.  They not only get to avail this reduced interest rate, but they can also make considerable savings in income tax. No wonder, a huge customer base from the Sub urbs, is drawing home loans from banks these days.

Section 80 C of the revised Income Tax Act permits a relaxation of up to Rs. 1 lakh on the interest of home loans. Moreover, under section 24(i) of the same act, an applicant might be eligible for a relaxation of up to 1.5 lakhs on home loan interests, if he actually lives within the purchased property.