Why is Home Loan an Investment in Disguise

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There are various kinds of loans available in the market. Some are meant to take care of primary needs while, there are others like car loan and travel loan which take care of the growing demands that are secondary in nature. In comparison, a Home Loan, by far, is perceived as being one of the most constructive forms of investment and not as a liability. To know why, read on…

The prime advantage of a Home Loan is its ability to yield capital appreciation over time. Justifiably and truly, real estate prices are mostly on the rise and a Home Loan helps you to build a long cherished and an immortal asset called ‘home’
When you are found eligible for a Home Loan through the Home Loan eligibility calculator, there is tax benefit that you enjoy. Once your Home Loan eligibility is clear and once your loan begins, you pay back in EMI. The EMI which includes the EMI Interest rate, has two components - Interest payment and Principal payment. Portion of Interest portion as well as the Principal of the EMI paid for the year can be claimed as deduction from your total income. This benefit makes a Home Loan, an attractive form of investment.
Pradhan Mantri Awas Yojana (PMAY) indirectly adds to the investment value of a Home Loan. It is a unique scheme for a first time home buyer by which the Government provides interest subsidy on the EMI amount that you pay to the Home Loan lender. The eligibility of Home Loan borrowers is broadly classified in accordance with their annual family income as follows;

- Economically Weaker Section (EWS) - up to Rs.3,00,000
- Low Income Group (LIG) - between 3,00,001 to Rs.6,00,000
- Middle Income Group - I (MIG - 1) between Rs.6,00,001 to Rs.12,00,000
- Middle Income Group - II (MIG - II) between Rs.12,00,001 to Rs.18,00,000

Think about it. When you stay in a rented house, your outgoing in the form of a rent does not yield an appreciation of the amount you keep paying. Compare it with a Home Loan. After paying all your EMI incessantly over the designated period and when your loan commitment terminates, you have a house that you can call your own. Go ahead. Take every step forward to fulfill your dream of owning a home by procuring a Home Loan.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

Why is Home Loan an investment in disguise

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