Secrets to Saving Big As a First-Time Homebuyer

As a first-time homebuyer, you may qualify for some sweet perks like tax savings, reduced interest rates, and even special discounts from developers. So, keep an eye out as you might have a chance to save a handsome amount

File photo
File photo

Purchasing your first home can be pretty overwhelming. But don’t worry, there are a bunch of perks that can make this experience a bit smoother - not to mention easier on your wallet!

Benefits galore: Under Section 80C, first-time buyers can claim tax benefits of up to Rs 1.5 lakh on the principal repayment of a house loan, but this is applicable only for homes that are completed and owned for at least five years from the date of acquisition;

Additionally, Sections 80EE and 80EEA provide a tax credit of Rs 50,000 on interest repayment for first-time homebuyers;

You can also get interest deductions of up to Rs two lakh per year under Section 24, provided the home is owned and not rented;

Section 80EEA of the Income Tax Act, 1961, provides an additional deduction on home loan interest for first-time homebuyers of affordable housing. The deduction is limited to a maximum amount of Rs 1.5 lakh per financial year, provided the property value is up to Rs 45 lakh and the loan is sanctioned between specific timeframes.

“The Real Estate Regulation Act (RERA) ensures transparency and accountability in the real estate sector, thus protecting the interests of buyers by curbing malpractices. The Pradhan Mantri Awas Yojana (PMAY) is aimed at providing “housing for everyone” and benefits first-time home purchasers from lower and middle-income families. The subsidy rates on the principal amount vary based on the buyer’s income, with additional income brackets recently introduced to extend the benefits to a wider segment of the population. Moreover, the housing subsidy GST has been reduced from 12 per cent to eight per cent for residences acquired under PMAY, allowing eligible first-time homeowners to avail of a higher subsidy of up to Rs 2.7 lakh,” informs Pritam Chivukula, vice president, CREDAI-MCHI.

Money matters: First-time homebuyers can avail of competitive home loan interest rates from top banks and lenders. These rates are generally tailored based on various eligibility criteria. Besides, if you’re a salaried employee, your interest rates could be lowered by 15-20 basis points as compared to those who are self-employed. Akash Pharande, managing director, of a real estate firm adds, “Banks occasionally roll out special offers for first-time homebuyers. You might see slight reductions in interest rates or other benefits such as a waiver on processing fees and prepayment charges, among others. However, these offers are usually available during the festive season. So, keep an eye out for these sweet deals.”

The interest rates you might end up paying on your home loan depend on several factors which include the size of your loan, the term of the loan, and your credit score. So, keep these factors in mind while planning your finances.

“Bigger loans, longer payback periods, or a weak CIBIL score may attract slightly higher interest rates. Remember, not all banks and financial institutions offer the same rates and terms for their loans. It’s essential to compare offerings from multiple lenders to get the best deal,” says Vickash Choudhary, founder of a real estate firm. The one mistake that first-time homebuyers often make is that they focus mainly on securing lower interest rates, but they should also consider other terms such as prepayment charges and processing fees while comparing loan offers.

Developers play their part: Developers often extend special reductions and benefits to attract first-time homebuyers and promote their projects. These benefits can vary depending on the developer’s marketing strategy and the property being offered. Common offers include discounts on the base price of the property, thus making it more affordable for first-time buyers. Some developers may also provide additional incentives such as free furniture or appliances, or free membership to gyms or clubhouses. Additionally, to ease the financial burden on first-time buyers, developers might offer flexible payment plans with staggered payments or lower initial down payment requirements. Developers may offer discounted prices to first-time homebuyers, especially in affordable housing projects. Some developers may waive off additional charges such as floor rise charges, preferred location charges, or clubhouse membership fees to attract first-time buyers. Developers may have tie-ups with specific banks or financial institutions, thus providing special home loan interest rates or processing fee waivers for buyers of their properties. Chivukula cautions, “Prospective homebuyers should thoroughly review all the terms and conditions of such offers before making any decisions to ensure they fully understand the benefits and implications.”