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Time to start planning your home purchase

The Union Budget is expected to bring good news for prospective homebuyers. Getting started early on the planning will help you get a good deal.

Budget 2017 is around the corner. This time, there are strong expectations of more benefits for homebuyers with higher tax breaks. Also, there are expectations of some relief in income tax and this in turn will leave prospective homebuyers with more cash in hand. This is welcome news. With property prices hovering at attractive levels, prospective buyers will find this an opportune moment to buy a home. In the wake of demonetisation, and the cash crunch with the new notes taking some time to reach the banks and ATMs; this will come as a trigger.

The home loan interest rates began on a downward trend recently and it is likely to continue. The sentiment is bound to look up as prospective homebuyers find their affordability factor going up with cheaper home loans, more tax sops and attractive property prices, all adding up to make this one of the best market conditions in recent times.

While the numbers will be out only on February 1st, and the exact amount you will get in additional tax benefits can be computed only then, it is time to get some spade work done if you have been planning to buy a home. A significant number of fence-sitters jumping into the fray post the Union Budget will push the market sentiment up a bit. So, some homework now will help you make a more informed choice two weeks later. Here are some pointers:

Arrive at your budget

While the Budget will be presented in Parliament on February 1, it will come into effect from April 1. This means you have a good two months to evaluate the implications of the Budget on your home loan after it is announced.

You can begin on the planning right now. Generate an income and expense statement with projected income through the new financial year. Further fine tuning can be easily made after February 1.

Ensure you include all estimated incomes such as salary, returns from investments etc. Deduct from this projected expenses. Include expenses such as insurance premium, one-time expenses such as a car purchase that may arise, monthly savings including savings in a contingency fund etc. You will get a rough idea of the sort of budget you have for your new home.

Draw up a statement in detail listing all these incomes and expenses. Here, factor in the EMI including the tax benefits as they stand now. This can be updated after the Budget is announced. Given the strong sentiment in the market expecting higher tax breaks in the coming financial year, your statement in all probability will look better after February 1.

Once the final picture is clear with the Budget, begin shopping for a home loan. Track the market carefully as many financial institutions are bringing down their interest rates. Go through the terms and conditions closely and pick one that is most attractive. If you choose your financial institution and loan scheme well, the overall cost of finance will be the minimum. It therefore makes immense sense to spend time and shop for your home loan. Beginning now on the planning will afford you the luxury of more time to spend on evaluating the various options available.

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