In the last few years, real estate has been one of the best investment options for investors. No matter how profitable it sounds, the rising growth of real estate as an investment option has led to high-reaching prices of property in the country. Both land and buildings have become quite expensive for customers to buy. This has led to an upsurge in the number of home loan applications each day.

Even though rising prices of real estate is one reason for borrowers to avail of home loans, another major reason behind this is that property transactions are generally hefty as compared with other daily financial transactions. It is not at all guaranteed that the buyer will have the entire property cost available with him or her at the time of acquiring the property. This is where home loans step in and bridge the gap between property seller and buyer.

Banks pay on behalf of property buyers in return for a particular rate of interest. The general rule of 80-20 applies here, which means that banks offer only 80% of the value of a home to customers and the remaining 20% is to be borne by the property buyer. This serves as a win-win proposition for both banks & capital buyers, as the banks are able to make profits by loaning out money while buyers are able to assimilate the entire cost of the property and pay it back within a fixed period of time.

Home loans are eligible for certain income tax exemptions, which can be used to save up on the amount of income tax that an individual pays every financial year. According to the income tax act, under section 24, tax benefit can be claimed on up to Rs.1.5 lakh out of the interest component of your home loan. In case you reside in the house bought through loan, then you can claim a maximum exemption of Rs.1 lakh on the principal amount of the home loan too.