Another round of home loan package to make purchase of a house within the reach of middle class end users?

Concessional interest rate for home loans up to Rs 30 lakh?

Tax rebate on payment of interest up to Rs 2 lakh?

Cheap Home Loans:

It is felt that making funds cheaper for end users could play an important role in arresting the slowdown. Therefore , it is learnt the government is planning to increase the present ceiling of Rs 20 lakh for the concessional rate to Rs 30 lakh.

This will meet the requirements of a large number of homebuyers in the cities of National Capital Region, in Mumbai , Bangalore, Pune, Chennai and Hyderabad.

If the ceiling is raised to Rs 30 lakh, one can buy a house up to Rs 35 lakh with the cheap loan.

Tax rebate on payment of interest on home loan:

At present, an interest amount up to Rs 1.50 lakh paid on the home loan taken to buy a house for self-use is deducted from the taxable income. The ceiling is likely to be increased to Rs 2 lakh.

1.50 lakh: Net interest rate 7.75%

This will help reduce the cost of fund further.

At present, if one takes a loan of Rs 30 lakh at the concessional rate of 9.25%, the interest payment in the first year comes to around Rs 2,77,500.

Out of this, you can take a tax benefit on Rs 1.50 lakh only, which will be deducted from your income , enabling you to save a tax outgo of Rs 45,000.

Which means, net interest one pays in the first year is only Rs 2,32,500.

This brings down one's net interest rate on loan to 7.75% from 9.25%.

2 lakh: Net interest rate 7.25%

But, if the tax benefit is increased to Rs 2,00,000 from Rs 1,50,000, the net interest outgo will be reduced by Rs 60,000 to Rs 2,17,500 on a loan of Rs 30 lakh at 9.25%.

That means, the net interest rate on one's home loan comes to 7.25%.

6%!

If the interest rate on home loan comes down to 8%, the net effective interest rate will come down to 6% if the deduction against the interest amount paid on home loan is increased to Rs 2 lakh.
To read more, please, visit - The Economic Times

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