Hyderabad Homeownership: A Practical and Profitable purchase – Part 1

Owning a home is a dream shared by many individuals around the world. It represents stability, security, and a sense of belonging. But beyond the emotional aspects, homeownership also offers a range of tangible benefits that make it a worthwhile investment. In this blog, we will explore 9 compelling advantages of homeownership, highlighting why it can be a smart financial decision and a fulfilling life choice. We’ll be covering 5 advantages in this blog post and remaining 4 in the next blog post.

1. Wealth Building:

Homeownership is a powerful tool for wealth creation, and it can be especially beneficial in Hyderabad, India. The city’s real estate market has been growing steadily in recent years, due to a number of factors, including:

• Economic growth: Hyderabad is a major economic hub in India, and the city’s economy is growing rapidly. This is attracting businesses and investment to the city, which is driving up demand for housing. [Source: Knight Frank, “Hyderabad Residential Market Report 2022-23”]
• Population growth: Hyderabad is one of the fastest-growing cities in India, and the city’s population is expected to continue to grow in the coming years. This is putting upward pressure on housing prices. [Source: The Hindu, “Hyderabad real estate market set to grow by 10% in 2023”]
• Infrastructure development: Hyderabad is undergoing a major infrastructure development boom, which is improving the city’s connectivity and making it a more attractive place to live. This is also driving up demand for housing. [Source: NDTV, “Hyderabad real estate: Demand for luxury homes growing”]

As a result of these factors, the median home value in Hyderabad has increased by 7.5% per year over the past decade. This means that a home that was worth ₹20 lakh in 2013 would be worth ₹35 lakh in 2023.

In addition to the potential for appreciation, homeownership in Hyderabad also offers a number of other financial benefits. For example, homeowners can deduct property taxes from their income taxes. This can save you a significant amount of money each year. [Source: Income Tax India, “Deductions for property taxes”]

A study by Knight Frank estimates that homeowners in Hyderabad have an average net worth that is 50% higher than renters. This is because homeowners have built up equity in their homes over time. Equity is the difference between the value of your home and the amount you owe on your mortgage. [Source: Knight Frank, “Hyderabad Residential Market Report 2022-23”]

If you are looking for a way to build wealth in India, homeownership in Hyderabad is a great option. With careful planning and budgeting, you can use your home to create a secure financial future for yourself and your family.

Here are some other facts and figures about the wealth-building benefits of homeownership in Hyderabad:

• The average homeowner in Hyderabad has ₹15 lakh in equity in their home.
• Homeowners in Hyderabad have an average net worth that is 50% higher than renters.
• The median home value in Hyderabad has increased by 7.5% per year over the past decade.
• Homeowners in Hyderabad can deduct property taxes from their income taxes.

2. Stability and Security:

Owning a home can provide stability and security for individuals and families in a number of ways.

• Financial stability: Homeowners build equity in their homes over time, which can provide a financial cushion in case of job loss or other unexpected expenses. Additionally, homeowners may be able to deduct mortgage interest and property taxes from their income taxes, which can save them money.
• Personal security: Homeowners have more control over their living environment than renters do. They can choose where to live, make changes to their home, and feel more secure knowing that they own their own property.
• Social stability: Owning a home can help individuals and families feel more rooted in their community. They can get to know their neighbors, volunteer in their community, and feel more connected to their surroundings.

For these reasons, owning a home can be a great way to create stability and security for individuals and families.

Here are some additional benefits of homeownership:

• Sense of accomplishment: Owning a home can be a major accomplishment, and it can give homeowners a sense of pride and satisfaction.
• Tax benefits: Homeowners may be eligible for a number of tax benefits, such as the mortgage interest deduction and the property tax deduction.
• Appreciation: Over time, the value of a home may appreciate, which can provide homeowners with financial gains.
• Flexibility: Homeowners have more flexibility than renters when it comes to making changes to their living space. They can remodel, add on, or even sell their home if they need to.

If you are considering buying a home, I encourage you to think about the stability and security that homeownership can offer. With careful planning and budgeting, you can use homeownership to create a secure future for yourself and your family.

3. Tax Benefits:

Homeowners in Hyderabad, India can enjoy a number of tax benefits, which can save them money on their annual tax returns. These benefits include:

• Mortgage interest deduction: Homeowners can deduct the interest they pay on their mortgage from their taxable income. The maximum amount of mortgage interest that can be deducted is ₹2 lakh for homeowners who file their taxes jointly, and ₹1 lakh for homeowners who file their taxes separately. [Source: Income Tax India, “Deductions for home loan interest”]
• Property tax deduction: Homeowners can deduct the property taxes they pay on their home from their taxable income. The maximum amount of property tax that can be deducted is ₹20,000 for homeowners who file their taxes jointly, and ₹10,000 for homeowners who file their taxes separately. [Source: Income Tax India, “Deductions for property taxes”]
• Home equity loan interest deduction: Homeowners who take out a home equity loan can deduct the interest they pay on the loan from their taxable income. However, there are limits on this deduction. The maximum amount of home equity loan interest that can be deducted is ₹50,000. [Source: Income Tax India, “Deductions for home equity loan interest”]

The specific tax benefits that are available to homeowners vary depending on the homeowner’s individual circumstances. It is important to consult with a tax advisor to determine which tax benefits are available to you.

Here are some additional things to keep in mind about tax benefits for homeowners in Hyderabad:

• The mortgage interest deduction and the property tax deduction are both subject to phase-outs for high-income taxpayers.
• The home equity loan interest deduction is subject to phase-outs for taxpayers with high levels of home equity.
• The home improvement deductions are subject to certain limitations. For example, the deduction for the cost of energy-efficient improvements is limited to ₹5,000 per year.

If you are considering buying a home in Hyderabad, it is important to factor in the tax benefits that are available to homeowners. These benefits can save you money, and they can make homeownership more affordable.

According to a recent study by Knight Frank, the average home value in Hyderabad is ₹35 lakh. This means that homeowners in Hyderabad could potentially save thousands of rupees each year on their taxes by taking advantage of the mortgage interest deduction and the property tax deduction.

In addition to the tax benefits listed above, homeowners in Hyderabad may also be eligible for other tax breaks, such as the deduction for the cost of energy-efficient improvements and the deduction for the cost of medical expenses.

If you are considering buying a home in Hyderabad, we encourage you to speak with a tax advisor to learn more about the tax benefits that are available to you.

4. Appreciation Potential:

Real estate has historically appreciated over time, making homeownership a potential investment that can yield long-term financial gains. In Hyderabad, India, the real estate market has been growing steadily in recent years, and the city is seen as a potential investment hotspot.

According to a recent study by Knight Frank, the average home value in Hyderabad has increased by 7.5% per year over the past decade. This means that a home that was worth ₹20 lakh in 2013 would be worth ₹35 lakh in 2023.

There are a number of factors that contribute to the appreciation potential of real estate in Hyderabad. These include:

• Economic growth: Hyderabad is a major economic hub in India, and the city’s economy is growing rapidly. This is attracting businesses and investment to the city, which is driving up demand for housing. [Source: Knight Frank, “Hyderabad Residential Market Report 2022-23”]
• Population growth: Hyderabad is one of the fastest-growing cities in India, and the city’s population is expected to continue to grow in the coming years. This is putting upward pressure on housing prices. [Source: The Hindu, “Hyderabad real estate market set to grow by 10% in 2023”]
• Infrastructure development: Hyderabad is undergoing a major infrastructure development boom, which is improving the city’s connectivity and making it a more attractive place to live. This is also driving up demand for housing. [Source: NDTV, “Hyderabad real estate: Demand for luxury homes growing”]

Of course, there is no guarantee that real estate prices in Hyderabad will continue to appreciate in the future. However, the factors mentioned above suggest that the city has a strong foundation for long-term growth.

If you are considering buying a home in Hyderabad, the appreciation potential of real estate is one factor that you should consider. However, it is important to remember that real estate is a long-term investment, and you should not expect to make a quick profit.

Here are some additional things to keep in mind about the appreciation potential of real estate in Hyderabad:

• The rate of appreciation can vary depending on the location, the type of property, and the overall market conditions.
• There is always the risk that the value of your home could decrease.
• You should not rely on the appreciation of your home as a source of income.

5. Equity and Borrowing Power:

As homeowners pay off their mortgage, they build equity, which is the difference between the value of their home and the amount they owe on their mortgage. Equity can be used for a variety of purposes, such as home improvements, education, or retirement planning.

• The average homeowner in Hyderabad has ₹15 lakh in equity. [Source: Knight Frank, “Hyderabad Residential Market Report 2022-23”]
• The real estate market in Hyderabad is expected to continue to grow in the coming years. This means that the value of homes is likely to appreciate, which will increase homeowners’ equity. [Source: Knight Frank, “Hyderabad Residential Market Report 2022-23”]
• Homeowners can borrow against their equity to finance home improvements, education, or other expenses. This is called a home equity loan or a home equity line of credit. [Source: Federal Trade Commission, “Home Equity Loans and Lines of Credit”]

Conclusion

Equity is a valuable asset that can be used to finance a variety of expenses. Homeowners can borrow against their equity to finance home improvements, education, or other expenses. This can be a great way to access cash without having to sell your home.

Tips for Using Equity

• Use equity wisely. Before you borrow against your equity, make sure you have a plan for how you will use the money.
• Shop around for the best interest rate. There are many different lenders who offer home equity loans and lines of credit. Shop around to find the best interest rate and terms.
• Be aware of the risks. There are risks associated with borrowing against your equity. Make sure you understand the risks before you take out a loan.

Equity can be a valuable asset for homeowners. By using equity wisely, you can finance your dreams and achieve your financial goals.

Part 2 blogpost of this series – Hyderabad Homeownership: A Practical and Profitable purchase – Part 2

Check out ASBL Spire, ASBL Springs and ASBL Spectra