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Builder Delays Will Not Cost You As Much

    IndianMoney.com Research Team | Friday, March 04,2016, 06:11 PM
 

You have finally decided to construct your dream home. You have gone through a number of newspaper advertisements and consulted a number of friends, to find a reputed builder to construct your dream home. Then finally…good news...You have found a reputed builder to construct your dream home. You even made the down payment on the apartment and booked it.

There’s more good news: A PSU Bank has sanctioned you a home loan and the builder has started the construction of your home.

The Promise: Your builder has agreed to complete the construction of your dream home within 3 years.

How does a delay in the possession of your apartment affect you?

You have availed a home loan to construct your dream home. You have to pay EMI’s each month on your home loan. You have to stay in a rented apartment, till your home has been constructed. This means you have to pay:

Rent on your apartment + Home Loan EMI’s.

The longer your house takes to get constructed, more is the rent you need to pay.

What happens if the builder delays the construction of your apartment by more than 3 years?

You have availed a home loan to construct your apartment. You can avail a tax deduction of INR 1.5 Lakhs on the EMI (Principal) of your home loan, under Section 80 C of the income tax act. You can also avail a tax deduction of INR 2 Lakhs on the EMI (Interest) of your home loan, under Section 24 (b) of the income tax act.

There’s more good news for you. If you are a first time home buyer, you get an additional tax deduction of INR 50,000 under Section 80 EE of the income tax act, on the interest you pay for your home loan.

The Problem

If you do not get possession of your home, within 3 years from the end of the financial year in which you availed the home loan, you will get a tax deduction of only INR 30,000 on the EMI (interest) on the home loan. You will not be able to avail a tax deduction of INR 2 Lakhs on the interest portion of your home loan, under Section 24 (b) of the income tax act.

But it’s not your fault

This is the builder’s mistake. It’s not your fault. He has promised to complete the construction of your dream home within 3 years. He has gone back on his word.

The builder needs to get you as a customer for his project. He agrees to all your demands at the time you book the apartment. Then…Raw material cost have increased….Labor prices have gone up… There’s a slow down in the economy…its recession…

What can the poor builder do?

There’s good news for you

The Finance Minister has made a proposal in the Union Budget 2016, to increase the time period from 3 years to 5 years. This means if you get the possession of your apartment within 5 years from the end of the financial year in which you availed the home loan, you can still get tax deduction of INR 2 Lakhs on the interest portion of your home loan, under Section 24 (b) of the income tax act. Your property needs to be self occupied.

You no longer need to suffer silently for the builder’s mistakes. The Union Budget 2016 has made your day.

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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