Despite the slack in India’s housing market, investment in real estate has been a tried and tested way to not only generate income but have an asset that only appreciates with time. No other investment has been so historically consistent. On account of being an essential commodity, the demand for housing has never been higher.
However, for a first timer buying a house can be a daunting experience not just because of the complexities involved but because of high barrier of entry in terms of price per unit in the real estate market. Here are some tips that will help you make a sound financial decision when it comes to purchasing your first unit.
As obvious as it may sound, you would be surprised at how many expenses you regularly incur which you can save on. Consistent monthly saving is not only going to help you get on the property ladder fast, but improve your financial health in the long run.
One of the ways you can begin to save money is by tracking and budgeting your spendings. Having a list of items you purchase which you can do without will give you a clearer understanding of your fiscal position and ways you can cut back on spending. A 2016 study on spending behvaiour of Indians revealed that 57% of all Indians have less than ₹ 5,000 in their savings account/emergency fund while 15% reported eating out a regular basis.
This statistic when read with mounting credit burden paints a grim picture in terms of financial literacy within the working class Indian. However, saving money with a low income can be achieved by judicious spending habits such as eating out less often and controlling one’s credit card spending including avoiding late fees by paying up on time.
Realistic Property Hunting
In scenarios involving low income households it is imperative to perform a cost benefit analysis before buying a house. The first step in that process of due dilligence is to find a property which will return value.
This may include house hunting in low cost areas which can can demonstrate growth in the coming years, based on the developments around the area you can decide the prospective renter on that property and decide the size of house that works best for your application. For instance, if you are buying a house in an area where the new offices are being established as was the case in places like Bangalore and Gurugram. In such cases one should consider whether a 2 BHK or 3 BHK would serve as a better rental income provider.
It is obvious that buying a property in cash is not only unrealistic but also not a prudent financial step. Mortgaging is the logical step going forward, it is important that you mortgage smart because it is a long term commitment and will tie you down if you don’t manage it with smarts.
Mortgage comes in all shapes and sizes and from almost all financial institutions which can come across as overwhelming decision to make, however understanding the market will help form a coherent idea for what works for you. Your financial position is another key factor pertaining to your mortgage requirements by inspecting your finances closely, you can arrive at a prudent position in terms of mortgage choice.