1. Apartments
In India, apartments are highly desirable and popular properties due to their contemporary appearance, modern amenities, and superior security measures. They are multi-storeyed buildings that contain multiple individual housing units and are consistently the top choice for buyers, except for those who wish to design their own property. Homebuyers are advised to consider factors such as budget, location, and personal preferences before selecting from the numerous options of ready-to-move-in flats available.
Investors often purchase homes with the intention of renting them out, and therefore consider factors such as rental yield and capital appreciation as crucial indicators of a property's financial potential. In addition to these internal factors, external considerations such as the property's location, accessibility, and demand in the local real estate market also play a significant role in determining its overall financial prospects.
Flats are often considered to have a wider pool of potential buyers and a higher resale value compared to other types of properties. This is due to the generally high demand for apartments, making it easier to find interested buyers.
Apartments have the benefit of having a wider potential buyer base and higher resale value compared to other property types. However, their appreciation in value may not be as fast because real estate appreciation is typically tied to the value of the land. With apartments, the wear and tear of the building can also increase the rate of depreciation, further impacting their appreciation potential.
Buying an apartment can offer tax benefits to individuals. If the property is self-occupied, the buyer may qualify for a tax rebate of up to Rs 2 lakh on the interest paid per financial year. Furthermore, they can also claim a tax deduction of up to Rs 1 lakh on the principal amount paid.If a property is rented out, the rent collected is generally considered income and is subject to taxation.
2. Plots
Plots are typically the fundamental units of land that do not include any built-up structures. They are often purchased by individuals who wish to build their own homes according to their preferences and requirements, or by investors seeking to generate significant profits from their investment.
Building a house is a meticulous and often time-consuming task, regardless of the circumstances. Those considering building a home must take into account the various financial costs involved, including the purchase of the land, construction, architect, and designer fees, and labor costs. It's worth noting that buying plots for sale and building a home can be extremely challenging and time-consuming.
From a financial standpoint, banks do offer loans for purchasing plots, but these loans can be relatively strict and have different terms compared to loans for apartments. For example, the loan limit for a land purchase loan is often lower than the loan limit for a constructed structure. This means that a larger down payment may be required for purchasing a plot of land compared to buying an apartment.
It is a well-known fact that plots cannot be rented out without any built structures. However, when compared to apartments, plots tend to have higher rates of capital appreciation, especially in lucrative market scenarios during the sale. Another significant factor is the balance between demand and supply. The ideal scenario is when demand is higher than supply, which can lead to higher capital appreciation for plots.
When taking out a loan to purchase a plot of land, one is generally not eligible for tax exemptions. However, if a structure is built on the plot, tax exemptions may be available for the loan amount sanctioned for the construction. These exemptions can only be availed of after the construction is completed.
It's important to note that if a plot of land is vacant and exceeds an area of 500 square meters, it may be subject to wealth tax.
3. Houses/Villas
Individuals who prioritize privacy often prefer to purchase independent houses and villas. However, the downside of buying such properties is the lack of security, power backup, and other amenities. Interestingly, in gated communities, property developers often offer a range of shared amenities and features such as security and power backup to address these concerns.
When it comes to the financial aspects of individual houses and villas for sale, they tend to have lower rates of capital appreciation when compared to apartments and plots. This is primarily due to the higher initial capital required and the comparatively lower demand in the market over time.
While the rental yield for individual houses and villas may be higher when calculated with respect to the initial capital invested, it is important to note that finding tenants for villas can be relatively more difficult when compared to apartments.
If an individual owns a property, they are eligible to avail of a tax rebate of up to Rs 2 lakh on the interest paid per financial year. In addition, they can avail of Rs 1 lakh on the principal amount paid, as a tax benefit
If an individual rents out their property, the rent collected is considered income and is taxable under the Income Tax Act.
Ultimately, the best option to buy depends on an individual's unique circumstances and preferences. It is important to consider all factors and conduct thorough research before making a decision.
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