Real estate as an avenue of investment always holds its own charm. Many individuals look beyond owning a home for varied reasons such as owning a second home in home towns or in places of work, as a vacation home or for renting it out. Whatever be the reason there are a few things that anyone should know about buying a second home.
1. First and foremost decide your criteria for buying a second home. The location needs would change depending upon the utility of your second home.
2. If it is for a vacation home look for a calm and quiet location, if you intend to rent it out look for a place in the city and if you are looking for capital appreciation look for places in the suburbs which has the potential for development.
3. Check for your financial position before you venture for second property. There needs to be a good gap of at least 5-7 between 2 big ticket loans.
3. When buying a second home , you are not eligible for subsidy from Pradhan Mantri Awas Yojana.
4. Only one of the homes that you own is considered as self occupied property. It need not be the home you essentially stay in. Other properties are all considered as let-out.
5. All let out properties are deemed to be let out and notional rent is added to your income irrespective of if it is really let out or not.
6. For all the let-out properties, 30% of the deemed rent is allowed as a standard deduction for repairs, maintenance and municipal taxes.
7. Income tax benefits doesn't stop at the first home that you own. Benefits are available even for individuals who go in for home loans on joint modes (joint home loans)
8. For the second home the interest paid on home loan is allowed as a loss from house property which can be set off against receipt from other sources of income up to Rs 2 lakhs. Any further interest paid can also be carried further up to a period of 8 years to be set off as loss against house property only. As earlier, the entire interest paid on home loan can no more be considered as loss from house property.
9. With the change in income tax rules, owning a second home may not prove to be a very beneficial investment as the interest payable on the loan may end up to-be more than Rs 2lakhs which may eventually turn out to be a burden on the individual.
10. Also remember home loans are big ticket and long-term loans, hence a good credit score is inevitable.