Ready-To-Move In or Under Construction: Which Is Better?
The possibilities of purchasing a ready-to-move in property brings in peace of mind, bearing in mind the tax benefit it offers on home loan as well as capital gains, when you intend to sell it a few years later. On the contrary, under construction property is comparatively cheaper than that of ready-to-move in property, but it has its own dis-advantages.
A common question that forefronts most home buyers is whether one should go for a ready-to-move in house or book an under construction house. Questions like, Why should one opt for a ready-to-move in house against an under construction property bothers most buyers. Factors like financial implication and tax implication accompanies the decision of the buyers.
Financial Implication
The option of going for an under construction property comes with an inbuilt risk of default on the part of the builders in handing over the possession as promised. A delay in handing over the possession from the builders end is a rule than an exception when it comes to under construction property. However, opting for a ready-to-move in property does not have that risk.
Investing your savings in the form of EMI for residential house, is not advisable since putting your life time saving to risk for a small difference will lead to excess expenditure. The best option would be to move into a ready-to move in property than an under construction one.
A ready-to-move in flat offers you with one striking benefit – Incase you intend to shift to a new house, you can save on rentals. Similarly, in case you are buying the house for investment purposes, the same can be let out and your investment in the house can start generating immediate returns for you.
Tax Implication
Apart from the above mentioned financial implications, there are income tax implications surrounding the decision of going for a ready to occupy property against an under construction one. Usually people take housing loans for the purpose of buying a house. The benefits of home loan for a residential house are available only after the construction of the property is completed.
When it comes to interest paid on housing loan for the years prior to the time you took possession, the income tax allows you to claim the same in five equal installments. In case of a self occupied house property where the maximum amount of interest benefit generally is restricted to ₹ 2 Lakhs and in case the regular annual interest on your home loan is already more than ₹ 2 Lakhs, the benefit of amortization of interest paid prior to completion of the construction is practically lost.
Benefits Of Tax Implication
The benefit of ₹ 2 Lakhs for interest on home loan for self-occupied house property, is available only if construction is completed within 3 years from end of the financial year in which the home loan was taken. This means that, if the construction of your house is not completed within 3 years, your eligibility for a home loan interest will drastically come down to ₹ 30,000 in case the same is used for your own residence. Income tax laws allow exemption from capital gains resulting from sale of any asset held for more than 36 months, if you buy a house within 2 years of such a transfer.
When it comes to repaying of your home loan’s principal amount, you will get a deduction of upto ₹ 1,50,000. Such a benefit is available only if you have taken possession of the property. Moving into a ready-to-move in home will give you more peace than going for an under construction property.
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