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Ideal Home Funding Options for 2016-17

We’re still in the first quarter of the 2016-17 fiscal year and safe to assume that much of the tax planning is still in the formulation stage for many of us. As usual, home loans are an attractive tax saving measure for this year as well and with additional sops added by the government they are also the most ideal home funding option for the year.

In addition to the tax-savings, home loans have become further attractive given the falling interest rates which will bring down the overall cost of ownership for your home. With increasing competition in the market, bankers are willing to sweeten home loan options to attract the first time home buyers. Therefore, home loans are certainly the most ideal home funding option for the current fiscal year.

However, home loans aren’t the only options for home owners. Given that the post liberalized Indian economy has already seen a tremendous value creation for a generation of middle-class. A lot of people are now looking at their second or third home purchase and these are being largely funded by asset-backed mortgages, life savings and or personal investments.

Mortgages have become particularly attractive options in the last few years because of the low interest rates and possibility of further decline in interest rates. Given the fact that the mortgage loans are backed by tangible assets, the banks are willing to take a higher risk and thereby lower the interest rate on loans. This helps consumers fund their homes with a relatively lower cash outflow and assured availability of funds.

Personal savings and investment bonds are also making a big headway in home funding. A lot of home owners, especially the older generation are willing to fork out a large share of their savings to put down one-time payments which helps them stay away from the monthly payment cycle and avail interest-free home ownership.

Thus, the home funding in India can be seen from a generational prism. The younger buyers opting for attractive loans, the middle aged buyers going for their second or third home purchase going for the mortgaged-backed loans and the older generation seeking to make personal savings a vehicle to purchase homes.

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