Buying A Second Home In India? Here’s How To Plan Budget, Loans, And Taxes

By Manoj Kumar Singla

Imagine escaping to a serene hill cottage or a breezy beachside retreat on weekends, or even working remotely from your own tranquil escape, far from the chaos of city life. Thanks to evolving lifestyles and the rise of flexible work models, what was once considered an exclusive luxury is now becoming a realistic possibility for many. 

Today, a growing number of Indians are considering second homes, not just for leisure, but also as remote workspaces or income-generating assets through short-term rentals. This rising interest, however, comes with a reality check that is affordability. High upfront costs and long-term commitments can make second home ownership seem daunting. That’s where strategic financial planning and smart borrowing solutions play a crucial role, helping to turn the dream of a second home into a practical, rewarding investment without exhausting one's savings.

Set a Budget, the Foundation for Freedom

Before diving into property searches or loan applications, a thorough assessment of your finances is paramount. Financial planners recommend keeping your total monthly EMIs, including those for your first home, car, or other loans, within 40–45 per cent of your take-home income. Also, remember that the cost of a property goes far beyond its listed price. Additional expenses such as stamp duty, registration fees, interiors, repairs, and ongoing maintenance can add up quickly. Calculating these in advance helps you arrive at a realistic budget, ensuring your dream aligns with your financial comfort.

Also Read : Debt Traps 101: What They Are And How To Climb Out

Smarter Ways to Borrow: Know Your Options

Getting a second home loan is possible, but expect slightly stricter conditions than your first. Most banks finance 75–80 per cent of the property value, often at a marginally higher interest rate. However, if you already have a home loan and have been repaying it diligently, you could explore a top-up loan, a hassle-free way to access additional funds with less paperwork and better rates. A smart financing option for your second home is a Loan Against Property (LAP), which allows you to borrow against the value of your existing home.

LAPs typically offer higher loan amounts and more flexible repayment terms compared to personal loans. To reduce your financial burden, consider co-owning the property with a spouse or family member. This way, one can split EMIs and claim dual tax benefits, provided both names are on the documents. Additionally, many reputed developers partner with banks and NBFCs, offering preferential interest rates, quick approvals, and simplified processes to make your second home purchase hassle-free.

Also Read : What Is A Nil ITR And Should You File One?

Leverage Special Offers and Understand Tax Benefits

Many developers collaborate with banks and NBFCs to offer exclusive home loan deals, including lower interest rates, zero processing fees, or faster approvals. These are worth exploring, but always compare offers independently to ensure the best fit for your financial goals.

From a taxation perspective, second homes offer smart advantages. If you rent it out, you can claim a deduction on the entire interest paid on your home loan. However, if the home is vacant, only one property can be self-occupied; the other will be treated as ‘deemed let out,’ and notional rent may be taxed. To maximize tax efficiency, speak with a financial advisor and plan your usage and rentals accordingly. Developers with investor-focused offerings often guide buyers on navigating these rules.

Also Read : Simple Habits, Big Gains: Your Step-By-Step Guide To Financial Wellness

Unlock the Full Potential of Your Property

A second home can also be an income-generating asset. Located in a tourist hub, it can be rented out through platforms like Airbnb, MakeMyTrip, or even local agents. This income can help offset your EMIs and maintenance costs. Alternatively, turn it into a serene work-from-home setup, offering productivity without the city’s chaos. Regardless of usage, always keep an emergency fund equivalent to 6–9 months of living and loan expenses. Also, invest in comprehensive property insurance to protect against natural disasters, theft, or accidental damage.

Acquiring a second home is undoubtedly a significant milestone, but it's a journey that absolutely does not demand the depletion of your life savings. With a range of smart financing strategies, from leveraging top-up loans and co-ownership to generating compelling rental income from your property, this aspirational purchase is more accessible than ever. It's time to transform the dream of a personal retreat into a tangible asset, securing not just a property but a lifestyle of freedom, financial intelligence, and enduring joy.

(The author is Managing Director, AIL Developer)

[Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP News Network Pvt Ltd.]

business