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Friday, December 26, 2008

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%.


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

Related Stories:

1) Public sector banks cut home loan rates to prop up demand

2) Details of the incentives for home loan borrowers up to Rs 20 lakh likely to be made public today

3) Interest Rate for Home Loans should be around 5 - 7.5%!

4) HDFC cuts interest rate by 50 basis points for home loans of more than Rs. 20 lakh for both existing & new customers

5) SBI makes its home, auto loans cheaper

6) RBI slashes rates to shore up growth

7) Government unveils Rs 30,700-cr stimulus package

8) Politics of donations behind home loan plan

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