What Is a Duplex Home? How To Finance a Duplex House In India?

Humans are emotional beings who want to live with their loved ones. A house where one can live with their family without compromising privacy is undoubtedly a perfect definition of life. 

Since the family is bound to grow, privacy needs arise, and buying a house is not something we do every few years, opting for a duplex house is an ideal option for multiple families who want to stay together. 

Buying a duplex is similar to purchasing a single-family house. However, buyers must know what it is and how it differs from other property types before applying for the Home Loan they need. In this article, you will clearly understand the meaning of a duplex house and how to finance one in India. 

What is a Duplex House? 

A duplex is a residential building comprising two separate living units. Depending on the design, the two units may lie next to each other or one above the other. The most common duplex designs in India feature one residential unit placed above another. However, developments and innovations in architectural trends may bring several changes to modern-style duplex homes. 

If it has three units, it is called a triplex, and those with more than three units are called multiplex homes. Most modern duplex homes in India have a living room, kitchen, and a bedroom on the ground floor and 1-2 bedrooms on the upper floor. 

Types of Duplex Homes 

Broadly, a duplex apartment can be of the following types: 

• Standard Duplex 

This is the most common duplex house design with two floors built vertically, one above the other. It generally consists of one living room, a kitchen, a bedroom on the lower floor, and one or two bedrooms or a children's room on the upper floor. 

• Ground Duplex 

A ground duplex starts from the ground floor of an apartment building, with the lower floor facing a garden and the upper portion housing a living room and a kitchen. It is a preferred option among people who want an attached open garden to serve their pets. 

• Low-Rise Duplex 

It is a modern duplex design with roomy balconies on the upper floor. The space in this design is smaller compared to other duplex styles. Making optimal use of the available space often becomes a challenge for architects in this design. 

• Side-by-Side Duplex 

A side-by-side duplex is comprised of two units that are adjacent to one another, sharing a common wall. The units are separated by an entry on each side and are generally single-storey. This layout is typical in plotted housing and is favoured by families who desire equivalent space on the ground level without needing stairs. 

Cost of Duplex Homes in India 

Generally, it costs around ₹1,200-2500 per sq. ft. in India. The final cost of a duplex depends on many factors like:  

• Construction type 

• Land area 

• Location 

• Finishing choices 

• Total construction area 

• Time consumed for construction 

• The material used and their costs, and several other factors. 

Typically, the total cost of building or buying a duplex home in India can range from approximately ₹25 lakh to ₹80 lakh or more, depending on the above factors. 

Advantages of a Duplex Home 

There are some advantages of duplex homes for Indian homebuyers: 

• Multi-family living with privacy

Duplex homes are suitable for families living close together with their own living space. Each unit has a separate kitchen, living room, and its own entry. 

• Rental income opportunity

Homeowners can live in one unit and rent out the other, generating a regular cash flow. Homeowners can use this income to pay off the Home Loan Equated Monthly Instalments (EMI). 

• Investment value

Duplex homes in prime locations retain their value over time, making them a good investment choice. 

• Flexible use 

The second unit can be used as a guest room, office, or space for the elderly parents, depending on the family's needs. 

Hurdles in Financing a Duplex Home 

Here are a few hurdles one may face while financing a duplex home: 

• Issue with Appraisal: Appraisals use comparable properties to value a house. Since duplex homes are unique property types with limited comparisons, lenders find it challenging to appraise them. If they undervalue the property, the borrowers will need to invest additional funds to make the down payment. 

• Determining the Rental Income: Many people buy duplex homes to rent out a portion of the property and live in the rest. For instance, small families can opt to reside on the lower floor and rent out the upper floor for an additional family income. Many owners use the strategy of house hacking to pay their Home Loan EMIs by renting out a part of the house. However, determining the rental income is challenging since appraising the property's price is prone to undervaluation. 

• Down Payment: Another potential hurdle is that duplex homes require bigger down payments than single-family homes. 

Availability of Home Loans on Duplex Homes 

Most financial institutions consider duplex homes as high-risk properties. That is because the idea of buying two houses on a single piece of land is not so common in India. If the borrower fails to repay the loan, the loan provider might find it challenging to sell the property and recover the outstanding loan amount.  

That is why they tend to lend a smaller percentage of the property's value as a Home Loan with a lower loan-to-value (LTV) ratio. However, each lender's perspective on the associated risks differs, and they often base their decisions on the borrower's repayment history and credit behaviour.  

Those with a decent income and good credit score often secure duplex home finance at competitive interest rates.  

Tax Benefits on a Duplex Home Loan 

Financing a duplex home through a Home Loan can also offer tax advantages under the Income Tax Act, 1961. In the old tac regime:  

• Section 80C allows a deduction of up to ₹1.5 lakh towards the principal repaid each year.  
• Under Section 24(b), a deduction of up to ₹2 lakh a year is allowed on the interest paid on properties that are self-occupied.  

For the rented unit, there is no cap on the interest deduction claimed against the income generated. It is recommended that homebuyers consult a tax advisor for advice based on their individual situation. 

Factors Influencing Home Loan Approval 

When seeking a Home Loan for a duplex, it's useful to know what lenders look at: 

• Credit score: A score of 750 or above is generally considered favourable. This increases the chance of loan approval and favourable interest rates. 
• Age: Younger borrowers can typically secure longer tenures. Inclusion of a younger co-borrower can benefit those approaching retirement age. 
• Debt-to-income ratio: Lenders prefer that the current debt be less than 40-50% of the monthly income. 
• Stability: A good job at a stable employer (2 years). 
• Down payment: 10-25% of the home value is required as a down payment, which is slightly higher for a duplex. 

Tips to Improve Home Loan Eligibility for Duplex Homes 

Despite several challenges that home buyers face while looking for duplex home finance, here are a few tips that can improve their Home Loan eligibility: 

• Look for a Property in a Prime Location: Properties in prime locations are less risky options for housing finance companies. In the case of a default, selling such properties is relatively easy for them, and they easily get their money back. So, ensure that the duplex home you are trying to buy is situated in a major city in an easily accessible locality. 

• Compare Loan Providers: Since loan providers do not approve duplex home finance easily, it does not mean you must grab any loan offer coming your way. Compare loan offers based on their loan amounts, interest rates, processing charges, repayment terms, and other parameters to identify the most suitable offer that fits your financial needs. 

Conclusion 

Duplex homes are good investment options for families looking for multi-family homes. Working to strengthen eligibility can make Home Loans access more straightforward, and making an informed decision based on thorough financial planning and research ensures a purchase that serves the family well for years to come.