Are you a first time home buyer? If you play your cards right, you could actually land your dream home without any hassles whatsoever. From Government benefits and tax deductions to vital tips, there are quite a few things that you need to keep in mind in this regard.
On that note, let’s start out by taking a look at some of the benefits that you can expect if you’re a first time home buyer.
First time home buyer benefits
PMAY (Pradhan Mantri Awas Yojana)
PMAY is one of the biggest first time home buyer government programs that you need to be aware about. This scheme has revitalized the affordable housing space under its mission of Housing for All by 2022 and is a welcome development for first time home buyers.
Here are the categories of applicants eligible under PMAY-
- Economically Weaker Section (EWS) – Household income lower than Rs. 3 lakh annually.
- Light Income Group (LIG) – Household income between Rs. 3-6 lakh annually.
- Medium Income Group 1 (MIG1) – Household income below Rs. 12 lakh annually.
- Medium Income Group 2 (MIG2) – Household income between Rs. 12-18 lakh annually.
- Women in EWS and LIG categories.
- Minorities including SC/OBC/ST and others (Caste & income certificates needed).
Here is the key information that you need to check out with regard to the interest subsidies that are offered under PMAY and the eligible loan amount out of the loan tally for claiming the same.
LIG & EWS Categories-
| Category | Eligible Loan Amount | Balance Loan Amount | Interest Subsidy | Initial EMI | EMI after subsidy credit | Annual Savings |
| EWS | Rs. 3 lakh | Rs. 1,66,360 | Rs. 1,33,640 | Rs. 2,895 | Rs. 1,605 | Rs. 15,480 |
| LIG | Rs. 6 lakh | Rs. 3,32,720 | Rs. 2,67,280 | Rs. 5,790 | Rs. 3,211 | Rs. 30,948 |
MIG1 and MIG2 Categories-
| Category | Maximum Eligible Loan Amount | Interest Subsidy | NPV Discount Rate | Maximum Carpet Area | Monthly EMI with subsidy | Monthly EMI without subsidy |
| MIG1 | Rs. 9 lakhs | 4% or maximum of Rs. 2.35 lakhs | 9% | 90 sqm | Rs. 5,834 | Rs. 7,894 |
| MIG2 | Rs. 12 lakhs | 3% or maximum of Rs. 2.3 lakhs | 9% | 110 sqm | Rs. 8,059 | Rs. 10,528 |
Eligibility Criteria-
- The family of the applicant should not have got benefits from any other housing scheme of the Government of India.
- The family of the applicant should not have any home in any part of India.
- With regard to married couples, joint/single ownership is possible and there will be just one subsidy for both.
Lower GST and Carpet Area Increases
In another welcome development for first-time homebuyers, the Government has lowered GST rates to 8% from 12% on homes which are bought under the CLSS (credit-linked subsidy scheme) of the Pradhan Mantri Awas Yojana (PMAY).
As per experts, first time home buyers with household incomes up to Rs. 18 lakh annually will have eligibility for getting benefits up to Rs. 2.7 lakh while purchasing a home up to 150 sqm under CLSS. Those not eligible under CLSS will pay 12% GST for the same home as per reports. Additionally, the carpet areas of homes eligible for subsidy on interest under CLSS have been enhanced.
In the MIG1 category, carpet areas have been scaled up from 90 sqm to 120 sqm and for MIG2, the carpet areas have gone up to 150 sqm from 110 sqm. This will naturally benefit first time home buyers.
Tax Deductions
First time home buyers who have taken loans in 2016-17 can get an additional benefit/deduction up to Rs. 50,000 under Section 80EE over and above other home loan deductions, namely deductions up to Rs. 1.5 lakh under Section 80C on principal repayments and up to Rs. 2 lakh under Section 24 on interest repayments.
This deduction comes with conditions, namely that the home is self-occupied with a maximum value of Rs. 50 lakh and maximum loan amount of Rs. 35 lakh. In the latest Union Budget, the Finance Ministry has proposed zero taxes for those earning up to Rs. 5 lakh per annum and even up to Rs. 6.5 lakh with particular investments. This will help first time home buyers immensely since there will be more cash in hand and savings. Standard deduction has also been enhanced to Rs. 50,000 from Rs. 40,000 earlier.
First Time Home Buyer Tips
There are quite a few tips that you should keep in mind if you’re a first time home buyer. These include the following:
- Make sure that you have a good credit score- This is highly important for getting your loan sanctioned and getting a good deal in terms of the amount and interest rate. Check your credit report prior to availing of the loan and in case you need to improve the same, wait it out before applying.
- Joint home loans equate to higher eligibility- Applying with your spouse for a home loan makes the most sense since a joint home loan will naturally come with higher eligibility, i.e. you can apply for a higher amount and repaying the loan will also be more manageable for both earning members. Additionally, if both applicants are co-owners of the property, they equally become eligible to get tax benefits which equates to higher savings.
- Home Loan Coverage & Costs- You should know that a home loan will cover only 70-80% of the value of the property that you wish to buy. You should have the remaining 20-30% at hand for making the down payment. Also, there are other costs like registration, stamp duty, loan processing and others that you should account for.
- Always compare lenders- Compare banks and NBFCs in order to find the best possible deal with regard to the eligibility criteria, turnaround times, interest rates, processing fees and so on. You may also obtain home insurance as part of the deal since this is a major future safeguard.
- Taxes on property- You should work out property taxes that are payable and factor them into your overall monthly budget.
- Use eligibility and EMI calculators- Always use EMI calculators to determine your EMI and work out how much you can afford to repay every month. Eligibility calculators help you find out the average loan amount that you can expect to get.
- Do your homework- Research on PMAY and other benefits that you can tap into as a first time home buyer in order to lower your costs.
