13 minutes
India’s diverse income levels create unique housing challenges, particularly for low-income households.
To secure affordable housing, potential homeowners should determine their budget, explore government schemes like PMAY, improve their credit scores, and save for down payments.
Government initiatives, tax benefits, and affordable housing projects provide support, making homeownership achievable even for those with limited income.
With careful planning and available resources, owning a home in India is possible for all.
India is a beautiful country with various diversities in terms of culture, language and even incomes. India a country where even middle class is broken into upper and lower middle class. That’s how different the income levels are in this country.
While some low-income households, particularly those at the lower end, struggle to afford decent housing without government assistance, many others, including the upper end, can manage with housing loans.
Expert Tips To Secure Your Dream Home
Determine your budget
- Calculate your monthly income and expenses to determine how much you can afford to spend on a home loan EMI
- Consider additional costs such as property taxes, maintenance, and utilities
- Use online home loan EMI calculators to estimate your potential monthly payments
Get the best Home Loan interest rates tailored for you
If you’re looking to choose the right home loan perfectly made according to your needs, then book a call with our experts here.
Explore affordable housing options
- Look for homes in less expensive neighborhoods or on the outskirts of the city
- Consider buying a smaller apartment or a resale property
- Research government-sponsored affordable housing projects like Pradhan Mantri Awas Yojana (PMAY)
- Look into cooperative housing societies, which often have lower prices than private developers
Take advantage of government schemes and subsidies
- Research government programs that offer assistance to low-income, first-time homebuyers, such as the Credit Linked Subsidy Scheme (CLSS) under PMAY
- Look into home loans offered by public sector banks, which often have lower interest rates and more flexible eligibility criteria
- Explore state-specific housing schemes and subsidies available in your area
Improve your credit score
- Pay your bills on time and reduce your debt-to-income ratio
- Check your credit report for errors and dispute any inaccuracies
- Consider working with a financial advisor to develop a plan for improving your credit
Save for a down payment
- Start saving as early as possible, even if it’s just a small amount each month
- Look into the Employee Provident Fund (EPF) withdrawal scheme for down payment assistance
- Consider asking family members for a gift towards your down payment
Work with a housing finance company
- Find a reputable housing finance company in your area
- Work with a representative to understand the home loan process and eligibility criteria
- Take advantage of educational resources and workshops offered by the company
Shop around for the best home loan rates
- Compare rates from multiple lenders, including public sector banks, private banks, and housing finance companies
- Consider working with a home loan broker who can help you find the best deal
- Don’t be afraid to negotiate with lenders to secure a better rate
Things To Keep In Mind For First Time Homeowners
Before house hunting, it is important to gain a clear understanding of your budget and income. This involves assessing your monthly earnings, expenses, and savings to determine how much you can comfortably allocate towards housing costs without compromising your financial stability.
Your credit score and financial stability are super important when you’re buying a home. Lenders look at these things to decide if you’re trustworthy enough to give a mortgage to and what kind of terms you’ll get. So, it’s a good idea to check your credit report, manage any debts you have, and make sure you have a steady income. This can help you get better financing options when you’re ready to buy.
So, how does everyone co exist? How does lower income groups fend for themselves and achieve basic necessities like food clothing and shelter? Are they even eligible for loans? Will they ever have a piece of land to call them their own?
Well, let’s talk reality today, as you know Indian is still a developing country although we stepped on Moon and we were the first country to introduce UPI, India still didn’t make the cut.
Why? Because of its the earning capacity of an individual.
So, how do people in the lower income category fulfill their dreams and what are the issues they face before buying a home?
Rapid urbanization and a shortage of planned affordable housing have left millions of urban families in India living in informal and often poor-quality housing conditions. According to the Government of India, between 26 to 37 million families fall into this category, mainly belonging to Economically Weaker Section and Low-Income Group households.
Basically, when you’re trying to buy a home in India, especially if you’re on a tight budget, it’s essential to understand your finances really well. Take care of your budget, know what you can afford, and make sure your financial situation is stable. With some careful planning and maybe a little help along the way, you can make your dream of owning a home a reality.
Government’s helping hand to low income individuals
What has the government done to resolve this issue and is there any handholding for those who dream of having their own house?
Well, yes, there are some schemes offered and here are the details —
The Pradhan Mantri Awas Yojana
The Pradhan Mantri Awas Yojana (PMAY) is a flagship housing scheme launched by the Government of India to provide affordable housing to the economically weaker sections (EWS), low-income groups (LIG), and middle-income groups (MIG) in urban and rural areas. It aims to address the housing shortage in the country and ensure that every Indian has a safe and secure home.
Under the PMAY scheme, eligible beneficiaries can avail of financial assistance in the form of interest subsidies on home loans or direct subsidies for construction or renovation of homes. The scheme has two components:
1.PMAY-Urban (PMAY-U)
This component focuses on providing affordable housing to urban poor including slum dwellers and those living in informal settlements. The beneficiaries receive assistance for the construction or enhancement of their houses.
2.PMAY-Gramin (PMAY-G)
This component aims to provide affordable housing to rural households. It provides financial assistance for the construction of new houses or for the enhancement of existing houses.
The PMAY scheme also incorporates various other initiatives such as the Credit-Linked Subsidy Scheme (CLSS) for home loans, technology innovation in construction, and beneficiary-led construction. It aims to promote sustainable and inclusive urban and rural development by ensuring housing for all by 2022 (now extended to 2025).
Karnataka and other states have implemented housing schemes similar to the Pradhan Mantri Awas Yojana (PMAY) to provide affordable housing to its residents. Some of the housing schemes in Karnataka are:
1.Basava Vasati Yojana (BVY)
This scheme is aimed at providing houses to economically weaker sections in rural areas of Karnataka. Under BVY, eligible beneficiaries receive financial assistance for the construction of houses.
2.Ashraya Yojana
Ashraya Yojana is a housing scheme targeted at providing shelter to the urban poor in Karnataka. It provides financial assistance for the construction of houses or for the purchase of houses/flats from Karnataka Housing Board.
3.Ambedkar Awas Yojana
This scheme is specifically for scheduled caste(SC) and scheduled tribe(ST) families living below the poverty line. It provides financial assistance for the construction or upgradation of houses.
4.Indira Awas Yojana (IAY)
Although this was a centrally sponsored scheme earlier, it provided housing for the rural poor, including SC/ST households. The scheme has been subsumed under the PMAY-G now.
These are some of the prominent housing schemes in Karnataka aimed at providing affordable housing to various sections of society. Each scheme has its own eligibility criteria and benefits, but they all share the common goal of ensuring housing for all.
Are you looking for lower interest rate home loans?
Taxman to the rescue for low income
The Government is also providing some tax benefits as a house warming gift for first time home buyers. Just joking but here are some of the other initiatives.
First-time homebuyers in India can avail various tax benefits under the Income Tax Act. Here are some of the key tax benefits:
1. Section 80EEA
This section provides an additional deduction of up to ₹1.5 lakhs on the interest paid on a home loan by first-time homebuyers. The loan should be sanctioned from FY April 1, 2019, and March 31, 2022, and the stamp duty value of the property should not exceed ₹45 lakhs. The individual should not own any other residential property on the date of sanction of the loan.
2. Section 24(b)
Under this section, homebuyers can claim a deduction on the interest paid on a home loan. For a self-occupied property, the maximum deduction allowed is ₹2 lakhs per annum. For let-out or deemed to be let-out property, the entire interest paid can be claimed as a deduction without any upper limit. low income home
3. Section 80C
Homebuyers can claim a deduction of up to ₹1.5 lakhs under Section 80C for repayment of the principal amount of the home loan.
4. Stamp Duty and Registration Charges
Stamp duty and registration charges paid at the time of property purchase are also eligible for deduction under Section 80C within the overall limit of ₹1.5 lakhs.
5. Joint Home Loan
If you have taken a joint home loan, each co-borrower can claim the deduction for interest payment up to ₹2 lakhs individually, effectively doubling the tax benefit.
These tax benefits help reduce the tax liability of first-time homebuyers and make homeownership more affordable. It’s important to note that the availability and limits of these benefits may vary based on the specific provisions of the Income Tax Act and any amendments made by the government from time to time.
Challenges in the low income housing sector
- Self-construction of Homes- Many low-income households opt for self-construction of standalone housing, using loans to build their homes on the outskirts of large cities or in tier II and III towns. Some AHFCs also offer “plot and construction” loans for customers to purchase land and build homes. low income home
- Developer-Led Housing- Informal developers supply apartments in localities with high demand, typically in Gram Panchayat areas outside cities, offering housing at lower prices. However, large formal developers face challenges in supplying affordable housing due to higher costs and distant locations. low income home
How Can We Build A More Inclusive Market
- Increase Affordability- Simplify the credit linked subsidies (CLS) scheme to make it more accessible to low-income households. Include semi-urban areas in eligibility criteria and reduce additional costs such as GST and stamp duty for small homes.
- Expand Market to Include Slums- Enable lending for home improvement/extension in slums by providing clarity on the legality of such financing. The government could support home improvement initiatives in slums under schemes like Swachh Bharat Mission.
- Incentivize Developers- Provide incentives for larger formal developers to participate in affordable housing projects, such as expedited approvals and relaxation of tax exemptions.
By addressing these recommendations, the low-income housing sector can become more inclusive and accessible, ensuring that more families have access to safe and affordable housing options. low income home
Best Practices to Secure Homeownership with Low Income
Assess Your Financial Situation:
- Create a detailed budget to understand your financial standing. Include all sources of income and track your expenses to determine how much you can realistically afford for a home.
Improve Your Credit Score:
- A good credit score increases your chances of securing a home loan at favorable interest rates. Pay your bills on time, reduce outstanding debt, and avoid applying for new credit frequently.
Save for a Down Payment:
- Start a dedicated savings fund for your home down payment. Aim to save at least 20% of the home’s value to reduce the loan amount and EMI burden.
Choose the Right Home Loan:
- Compare home loan options from different banks and financial institutions. Look for loans with lower interest rates, longer tenure, and flexible repayment options.
Get Pre-Approved for a Home Loan:
- Getting pre-approved for a home loan gives you a clear idea of your borrowing capacity. It also shows sellers that you are a serious buyer, which can be advantageous during negotiations.
Seek Professional Advice:
- Consult with real estate experts and financial advisors to make informed decisions. They can help you navigate the complexities of buying a home and securing a loan.
Consider Joint Ownership:
- If possible, opt for joint ownership with a family member or spouse. This can increase your loan eligibility and share the financial burden.
Tips and Tricks to reduce your burden
In India, there are various affordable housing options available for individuals looking to own a home.
Housing Projects by Developers
Many developers in India, especially in emerging urban areas, offer affordable housing projects. These projects typically offer smaller-sized apartments with basic amenities at relatively lower prices.
Developers often collaborate with the government under schemes like PMAY to provide affordable housing. These projects may come with subsidies or incentives for buyers.
Resale Properties in Emerging Areas
Buying resale properties in emerging areas can be a cost-effective option. Emerging areas usually offer properties at lower prices compared to established neighborhoods.
These areas may witness rapid development in infrastructure and amenities over time, leading to potential appreciation in property value.
Co-operative Housing Societies
Co-operative housing societies are popular in India, especially in cities like Mumbai and Pune. Members collectively own and manage the housing society, which often leads to cost savings.
Buying a flat in a co-operative housing society can be more affordable than purchasing an individual property, as members share expenses like land, amenities, and maintenance. low income home
Joint Ownership
Joint ownership of property involves two or more individuals jointly owning a property and sharing the financial burden.
This option allows individuals to pool their resources and purchase a property together, making homeownership more affordable. It also enables them to share the responsibilities of loan repayment and maintenance.
Rent-to-Own or Lease-to-Own Options
Rent-to-own or lease-to-own options allow tenants to rent a property with the option to buy it at a predetermined price after a certain period.
This option is beneficial for those who may not have enough funds for a down payment immediately but want to secure a property for the future. A portion of the rent paid may go towards the eventual purchase of the property.
While rapid urbanization and income disparities pose hurdles, the government and housing finance companies are making homeownership more accessible. From PMAY schemes to affordable housing projects, there’s a buffet of options for everyone. low income home
Conclusion
Historically, access to housing finance for these customers has been limited. However, affordable housing finance companies have come in the market, recognizing that low-income customers may lack reliable documentation but have stable incomes.
Frequently Asked Questions [FAQs]
Look for properties with 24-hour security, gated communities, and CCTV surveillance. Also, research the crime rates and safety measures in the area before finalizing a property.
The main housing options in India include apartments, independent houses, villas, condominiums, and co-living spaces. The availability of these options may vary depending on the city and location.
When choosing a location, consider factors such as proximity to your workplace, schools, hospitals, transportation, and amenities. Also, research the safety, cost of living, and cultural aspects of the area.
Conclusion
For those dreaming of real estate, there are ways to make it happen. Consider joint ownership, co-operative housing societies, or rent-to-own options.
So, whether you’re a tech-savvy urbanite or a countryside dweller, owning a home in India is within reach. With the right ingredients and optimism, everyone can find their place in this diverse melting pot of dreams. Just remember, when life gives you lemons, make lemonade, and when it comes to homeownership, you got us at Credit Dharma.