Budget Housing: The Pros and Cons of Such Homes

With the real estate prices constantly going up, affordability and budget homes are the buzz words. While it is difficult to find affordable homes in cities such as Mumbai and Delhi, one can still find budget homes in many cities such as Bangalore and Pune, where one can buy a 2BHK flat within the budget of Rs 50 lakh. Even Navi Mumbai and Thane offer budget homes within this budget. However, there are both pros and cons attached to these budget houses.

Pros of budget houses

1. Budget houses are usually available within a low budget. For example, while a 2BHK apartment from a high profile builder may cost Rs 70 lakh, a budget house from a local builder may cost about Rs 45-50 lakh. Hence, it is well within the affordability range of most home buyers.

2. These houses have huge demand from the middle income group. As such, investors who want to sell their property may witness more liquidity, as these properties sell faster. Moreover, since the demand is high, these properties also have the potential for a good appreciation in a shorter period compared to the high-priced properties.

3. Most times, budget homes are available in the peripheral areas, which still need to witness growth. However, when these areas grow, the percentage of appreciation is higher. For example, Karjat, an area in the outskirts of Navi Mumbai witnessed an appreciation of 6 per cent within the first three quarters in 2013, while Walkeshwar, an area in South Mumbai witnessed just an appreciation of 3.6 per cent during the same period.

4. If you are buying a house for the first time taking a home loan, you have a tax advantage. According to the Union budget in 2013, first time home-buyers are allowed an additional tax deduction of Rs 1 lakh on loan interest for housing loans up to Rs 25 lakh, provided that the house value does not exceed Rs 40 lakh. This means that, people buying budget houses using home loans have an advantage of waiver of Rs 1 lakh on home loan interests.

Cons of budget houses

While there are certain advantages of budget houses, there are also disadvantages of budget houses. Some of them are:

1. Most of the budget houses are in the outskirts which lack good connectivity and social infrastructure. These may create problems for many home buyers. Also, if the house need some repair and maintenance, it may prove a hard time to find a solution.

2. Budget houses also usually lack the kind of amenities a big budget builder may provide such as swimming pool, club house or even the quality of house fittings such as door and bathroom fittings among others.

3. One may buy a budget house from the point of selling it at a higher price later. However, finding a buyer for a house in the remote areas is not easy. While the return is good on paper, it may not be attractive in reality. The rental yield in such properties is also low compared to other properties with better social infrastructure and good amenities.

Small budget houses definitely prove advantageous if you are an end user and are alright with compromising on certain things such as connectivity, social amenities and quality. However, you may also want to consider the disadvantages a budget house brings with it, before going for such a house.