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Don't Buy House in India Without Reading This
Updated : May 8, 2024
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Only a very few people in the country can wake up and buy a house on a whim. For the rest of us, taking a huge financial decision like buying a home takes a lot of thought and planning. So while we are seeing a rising demand for buying a home in India, after a long period of prices falling and stabilizing, prices are going to rise again as per recent reports from Knight Frank. That said, the income levels are rising for the Indian populace, so is their preference for bigger homes, more amenities, as well as attractive prices for them to come to a decision. If you are one of them, don’t buy house in India in 2023 without reading this blog. In addition to several important considerations before buying a house, we have also rounded up some of the best times to purchase a home within a year.
Set A Budget When Buying House
The way you calculate how much you spend on your home should be based on how much you make and how much you can afford to pay on EMI comfortably. You should not have to struggle or live hand to mouth because of a hefty EMI. You start by adding up all the sources of income you have i.e. salary + freelance work + bonus = total monthly income. Now, deduct your monthly expenses from this amount. If you feel your expenses are too high, then look at areas you can cut back spending on. The EMI should ideally not exceed 20-25% of your net take-home pay. If your EMI works out to 40-50% or even more of your net income, then you might neglect other goals to pay the EMI, or struggle if any unforeseen expense comes up.
Save for your down payment
The Reserve Bank of India (RBI) and National Housing Bank have stated that housing finance companies and banks are not allowed to lend beyond a certain percentage of the fair market value of the property. This percentage is the loan to value (LTV) ratio. If you’re looking for a loan amount of Rs 30 lakhs, you can get a loan of up to 90% of the value of the house. The LTV for a loan between Rs 30 lakhs and Rs 75 lakhs is 80% and beyond Rs 75 lakhs, it is capped at 75%.
In order to buy a home worth Rs. 50 lakhs, you need to have at least Rs. 10 lakh ready and then you can borrow the rest. So, depending on how much you have saved you can decide your budget for the house. Or, you can start investing in debt schemes, through monthly SIP, invest in Mutual funds, etc. to build up your savings.
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Decide On Where to Buy a House
Do your research on which localities are growing, it is better to invest here than go to an already well-developed locality. Posh localities will be too expensive and might not appreciate at the rate you wish. Growing localities might be more affordable and a better option. Look at options in the suburbs if you want to avoid the crowds in the city. Although buying homes in other cities might be tempting, this is not a good idea. There are many cases in which buyers who were not familiar with the new city got stuck with the wrong project.
You should also be aware of the rental rates and resale rates in the area you’re investing in. This show you how risky/safe investing here would be.
Look For the Best Time to Buy a House
In India, the most popular time to buy a house is during summer. This makes sense as kids are on their summer vacation and it’s easier to move as a family, it does not disrupt their school life. Since summer is a popular time, there are many builders who offer special discounts and offers to attract buyers, you can watch out for these. These offers even happen during festival season, so timing is important.
If you are looking to buy a resale home, be patient. There are many homeowners who sell their property at great rates. You can get a house at a great bargain, there are investors who are now looking to offload property that they have bought a few years ago at 0% margin or even for less than what they paid. Now is your time to grab these homes.
Choose The Right Home
If you are buying a home for end-use, or as an investment, don’t be hasty. Shop around, look at as many options as possible before you choose a home. Talk to many builders, talk to residents and don’t go with the first home you see.
Look at reviews, work with experienced teams like NoBroker who can show you many options, get you the best deals and even negotiate for you on your behalf. Find out more here. Hire home inspectors and get excellent lawyers so that your documentation and home are sound.
All the best on your home purchase! And remember, NoBroker is here to assist you at every step of the way. Drop us a message below or reach us on NoBroker by clicking below.
FAQ's
The EMI should ideally not exceed 20-25% of your net take-home pay. If your EMI works out to 40-50% or even more of your net income, then you might neglect other goals to pay the EMI, or struggle if any unforeseen expense comes up.
Depending on how much you have saved you can decide your budget for the house. Or, you can start investing in debt schemes, through monthly SIP, invest in Mutual funds, etc. to build up your savings.
While the pandemic brought the prices for real estate properties down in 2022, 2023 will see a steady rise in prices.
In India, the most popular time to buy a house is during summer and festivals where special discounts are offered by builders and developers.
As per RBI rules, home loan lenders in India can only offer 80% of the property value for home loans going beyond 30 lakhs, and the balance 20% must be arranged by the borrower.
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Sanjay Gogia
Such an interesting article showcasing step by step guide that how one should plan the four opting for any apartment or a house. It is more like a step by step guide helping specially first time home buyers.