SECOND TIME'S A CHARM

Sep 02 2017 : The Times of India (Pune)





Real estate has always been a safe and risk-free investment option. If you have saved enough money, invest in a second home and get handsome returns in the future

Tax breaks: If you invest in a second home, there are multiple tax benefits that you can avail of. One of the major advantages is the interest payment benefits that you are claiming for your first home.However, in the General Budget for 2017-18, the union government decided to cap tax benefits on the purchase of a second home.This may deter people to use real estate as an instrument to save tax.Till now, if one bought a second house by taking a loan, the interest of the loan was treated as an expenditure to acquire the asset.Therefore, the entire interest payment, minus the rental income from the property, could be deducted from the buyer's gross earnings.Safe retreat: Developers are offering retirement homes with guaranteed rental income. The biggest advantage, if they are holiday homes, is that they can be leased out during tourist seasons to earn profits.Additional income source: If you have invested in a second home, it will turn out to be an additional source of income and you will receive steady income every month for the rest of your life.Renting out to corporate offices: You may also rent out your second home to corporate houses, which will assure you a regular income. With corporates looking at houses for accommodating their employees, you can consider leasing out your second home to companies as well.
10 reasons for investing in a second home
1 It is best to make higher down-payments for your second home as these loans are usually taken later in life and might be a hindrance during your years to retirement.
2 This is because in your 50s you might have major financial commitments like your child's higher education and marriage and the EMI could become a burden at that point of time.
3 Another fact is that most banks require home loans to be closed by the time you retire, even if the tenure of the loan is longer.
4 For example, most banks' home loan terms state that the maximum loan term is 20 years or retirement age of the borrower, whichever is earlier.
5 The most important point to look at is your EMI to income ratio. This can affect your desired loan tenure.
6 Banks look at this ratio before granting loans. This ratio reveals the percentage of your monthly income that you spend for meeting your total debt payments. This ratio should not exceed 50 per cent.
7 Some institutions consider 60 per cent as the limit, but for that your monthly income needs to be higher than Rs 1.5 lakh. Banks also look at your bank statements to ascertain that you have enough surplus funds on hand.
8 It is also a preferred investment option for NRIs.
9 If you invest in a commercial property, you will be getting a regular income. Same is the case if you buy a house for investment purposes.
10 Second home also lends a status symbol.