As we approach the new financial year, it is essential to review and plan our finances for the remaining year to have a clear picture of our income, expenses, and financial goals. Real estate being a steady asset provides several tangible and intangible benefits. It is a place where you can build your life, create memories, and raise your family. But beyond the emotional significance, a home can also be a valuable asset that can provide financial benefits such as high returns on investment, steady cash flow through rental income, tax savings, diversification of your investment portfolio and so on.
In this article, we will explore some reasons why investing in a home can be a smart financial decision:
One of the most significant benefits of owning a home is high returns on investment over the long term. Unlike other investments that may fluctuate in value, the value of a home tends to appreciate over time, providing you with a higher return on investment when you decide to sell it. This appreciation in value can also help you build equity in your home, which can be used to fund other financial goals.
Homeowners can save on taxes by claiming deductions on the principal and interest amount paid towards the home loan. This can reduce your taxable income and save you money on your taxes.
You can now buy a home even early in your career, thanks to the focus on affordable housing. The Government of India has launched several schemes to promote affordable housing, such as the Pradhan Mantri Awas Yojana, homebuyers can claim subsidies on their home loan if they meet certain income and other eligibility criteria. This can help make homeownership more affordable and accessible for first-time buyers. Additionally, Grade A developers have also started building affordable housing projects ensuring good quality constructed homes along with amenities that offer a great lifestyle.
In India, stamp duty rates are lower for women investors. For example, in some states, women are eligible for a reduced stamp duty rate when purchasing property, which can range from 1% to 2% lower than the rate for male buyers. These benefits can provide significant cost savings for women investors.
A home can provide a steady flow of cash in several ways. The most common way is through rental income. As rental rates tend to increase over time due to inflation, the rent you earn from your property can be a good source of income.
Additionally, a home can provide a variety of opportunities to generate a steady flow of cash, whether through reverse mortgages, or appreciation in value. By leveraging these options, homeowners can effectively manage their cash flow and achieve long-term financial goals
Tax rebates for maintenance and renovation are incentives provided by the government to encourage property owners to maintain and improve their properties. Homeowners can claim tax rebates on expenses towards maintenance or renovation of their property. This can help reduce the cost of these expenses and provide additional tax savings.
Real estate has historically shown a low correlation to other asset classes, such as stocks and bonds, which means that it can provide a degree of diversification to an investment portfolio. This can help to reduce overall portfolio risk and volatility, as real estate prices may not move in the same direction as other asset classes during periods of market turbulence, providing a sense of stability in your financial plan. Furthermore, owning a home can provide a sense of stability and security that is not typically found in other investments.
There are several ways that owning real estate can protect against inflation. First, property values may rise higher than the rate of inflation, leading to capital gains. Second, rents on investment properties can increase to keep up with inflation. Finally, properties financed with a fixed-rate loan will see the relative amount of the monthly mortgage payments fall over time
In conclusion, a home is an important part of financial planning for the year, as it provides a sense of stability, security, and long-term value, a hedge against inflation, a potential source of capital appreciation, and a predictable stream of rental income. In addition, owning a home can also provide a degree of diversification to an investment portfolio, as real estate has historically shown a low correlation to other asset classes.