Second home investment reduces tax burden
The housing industry is attracting towards investing in second homes. According to the several reports says huge number of salaried people as well as businessman. Due to global economy slowdown in real estate market realty investors have set second homes as their new target for investment in property market. Hundreds of real estate investors are looking to invest in second homes to earn profit from this source, sources said.
On the other hand anticipated appreciation of the property there is another strong reason for this trend. It is the lucrative savings on taxes that can be availed on the second home loan. One can avail a second home loan depending on repayment capability and then avail tax deductions on the interest being repaid on the second loan while continuing to enjoy the tax savings on the principal as well interest of the first loan repayments. Tax Exemption Policy: Any buyer who avails a home loan for the purchase of residential unit is eligible for tax exemption under Section 80C of the Income Tax Act.
In such cases the amount repaid towards the principal of the loan is exempt from taxable income up to maximum limit of R1 lakh per annum. Similarly, the amount repaid towards interest element is exempted from taxable income to a limit of R1.5 lakh per annum.
In the case of a second home for which a loan is taken, there is no exemption for repayments on the principal element. However interest paid on the second home loan is exempt from taxable income and there is no upper limit to the amount that can be exempt.
Whereas, the following points should be kept in mind while investing in second homes:
•The area where a second home is located should show promise of development in the near future.
•There should be good development in the second home scheme itself.
•The property should be very well maintained in order for it to be able to attract attention of prospective future buyers.
• The project should have good amenities and conveniences which can attract the interest of the buyer and make the investment worthwhile. Special emphasis is laid on recreational amenities, health related amenities and lifestyle.
•An attraction like a popular restaurant, spa, picnic spot, resort etc being part of the project is an ideal scenario. These attractions ensure foot falls in the project from outsiders, make businesses in the project viable and ensures that a resale market is created as there will be demand for properties for sure.
•The presence of such attractions also ensures that the second home project is well maintained, kept clean and attractive.
•This ensures that a resale market is created which ensures liquidity which makes the investment very lucrative and dynamic in ones portfolio.