Buying a Home in India Is Affordable: Know How

January 20, 2023

Are you planning to buy a home in India? If yes, knowing whether you can afford it is a bigger question. 

Buying a home is a lifetime investment. During such big-ticket investments, more may always seem less. You need to save for the down payment, and you will need funds to meet additional expenditures as well. 

This blog will help you with five quick tips that can help you afford to buy a home in India. Let’s find out about them!

  • Begin Saving Small Now

Do not get overwhelmed by the down payment, and begin saving small. Think about when you want to buy the house. Divide the amount you will need for a down payment by the number of months you have in buying the house. 

Say if you were to buy a house in Mumbai, you must be aware of home prices in Mumbai too and decide that you must have the appropriate budget or not. 

If you are planning to take a home loan, ensure that you go by the thumb rule of not spending more than 25% of your net salary on the mortgage. While saving is crucial, it is imperative that you cut any overhead expenses possible and earn additional income if possible. You can also think about a payroll savings plan. This will let you save a certain amount of your pay, and it will directly go into a savings account. If needed, think about increasing your savings rate as well.

  • Think About A Systematic Investment Plan (SIP)

A SIP will allow you to invest a fixed amount in mutual funds regularly. You can begin an investment of INR 500 and get the benefit of rupee averaging cost and power of compounding. Once you begin investing continuously irrespective of the market conditions, you get more units when the market is low and lesser units when the market is high. This reduces your cost of investment significantly. It holds a huge potential to deliver lucrative returns. 

Buying a home can take a toll on your savings and salary. Hence, using a SIP will help you inculcate a financial discipline. Its sole purpose is to repay your EMI and can also be seen as a reverse EMI.  

  • Consider Investing In Profit Earning Instruments

Let us say you need 70 lakhs in the next ten years to buy a house, it is wise to invest in profit-earning instruments. They will help you earn a good enough rate of appreciation in a given period. You can invest in 

  • Mutual funds
  • Fixed Deposits (FDs)
  • Public Provident Funds (PPFs)

You can get anywhere between 9 to 15% returns on mutual funds. As per a media article, there were direct plans for eight schemes that gave more than 20% returns. If you consider investing in a PPF, you can get up to a 7.1% interest rate when compounded annually. The best part about investing in a PPF is you can open a PPF account with as little as INR 100, and they are entirely risk-free. You can get anywhere between 5-7% interest rate for FDs as well. 

As per another report, PNB, Indian Overseas Bank, Punjab & Sind Bank, Bandhan Bank, Kotak Mahindra Bank, Karnataka Bank, and Yes Bank even hiked their interest rates in the first week of January.

  • Give High Yielding Savings Account A Try

Putting your money in a high-yielding savings account can help you reach your goal of buying your dream home quickly. The high-yielding accounts provide you with a higher interest rate so that your money grows quickly. It enables you to earn interest on interest. The higher your annual percentage yield (APY), the faster your money will grow, and give you a better return than a traditional bank account. If you want a higher interest rate as compared to your traditional savings account, you can opt for high-yielding savings accounts. 

 

Before you decide, have a fair idea about how much your dream house will cost in the future. Save right, study the market and consult an expert who can guide you through this process.  

  • Check Your Eligibility To Opt For PMAY-CLSS Scheme

If you want to avail a home loan, do not forget to check your eligibility for Credit Linked Subsidy Scheme (CLSS) under Pradhan Mantri Awas Yojana (PMAY). This scheme under PMAY(U) offers you an interest subsidy on the home loan. The loan term is 20 years at 10% annual interest. This scheme has something for everyone whether it is someone from EWS, LIG, and MIGs. You get a subsidy on the payable interest, and the subsidy is transferred to your account. It will help you manage your monthly instalments.

 

Category Annual Household Income (In INR) Dwelling Unit’s Carpet Area (In square metres) Reduction in EMI Overall Savings (In INR)
Economically Weaker Section (EWS) Up to 3 lakhs 30 2500 More than 6 lakhs
LIG (Low Income Group) 3-6 lakhs 60 2500 More than 6 lakhs
Middle Income Group – I
(MIG – I)
6-12 lakhs 160 2250 More than 5.4 lakhs
Middle Income Group – II
(MIG-II)
12-18 lakhs 200 2200 More than 5.3 lakhs

Conclusion

Investing in purchasing a home is a high-ticket purchase in itself. So, it is always better to begin saving small from a young age. It will help you manage your expenses well. Consult a finance expert to create a savings plan which can maximise your funds.