After the pandemic, property prices and interest rates have surged, housing loans and property sales have increased in India. The RBI data shows that the all-India house price index rose in the fourth quarter of 2022-23 over the last 17 quarters, and quality-conscious millennials prefer A-grade builders delivering projects priced in the Rs 1-2crore range, according to Bankbazaar's data.
Over the last eleven years, the share of residential housing loan loans in total has increased from 8.6 per cent in March 2012 to 14.2 per cent in March 2023. In March 2023, total exposure of the banking system to real estate fell to 16.5 percent, making the total exposure of the banking system a significant contributor to the real estate market.
The cash required for a down payment indicates financial preparedness for a homeownership. If you have the minimum amount of money, you can borrow the rest. The expenses for out-of-pocket are either up-front or staggered.
A credit score above 750, apart from a strong income and a long working life, qualifies you to be a desirable borrower and qualifies you for lower interest rates. To score 800, target a score of 800 before you borrow it.
To commit to homeownership, you have to invest both financially and emotionally in a property, instead of treating it as a short-term investment. When you research the housing market in your location, ensure that it matches your lifestyle and financial objectives. Be sure the item you're buying is legal, clear titles, and not under dispute. To vet the papers, you should contact a property lawyer. A loan may cover 75-90% of the total amount of the base price, GST, amenities and services. The rest-i.e., 10-45%-comes out of pocket. Large expenses, such as stamp duty and furnishing, must be covered and must not be covered by the buyer's savings.
The closer a buyer is to retirement, the shorter their loan tenors will be. Elderly buyers may also have saved up a significant amount of money. Hence, the upfront payment may be much more than 10-45%. It can be saved with long-term investment options. A home loan can cover the rest of the borrower's eligibility based on the borrower's eligibility.
FD or recurring FD: FD or recurring deposits with a commercial bank or post office are safe options for protecting your savings and getting moderate returns. They can be liquidated quickly. The AAA-rated company deposits can also be helpful for those looking to earn a competitive edge. Short-duration mutual funds, like overnight funds and liquid funds, invest in money market instruments. They are a low-risk option and better for short-term savings than equity funds that can be unstable. For long-term savings, equity has delivered high real returns in the long term. For long-term objectives like retirement planning, it is ideal. If you want to secure capital protection, you must move from debt to debt as you approach your target.
Your PF can help: Long-term debt savings like Employees Provident Funds are meant for retirement planning but can also help with home-buying. subscribers can withdraw up to 90% of their savings for home construction or purchase.
In many cases, returns, i.e. returns after inflation, are negative in many cases, assuming an inflation rate of 6 per cent. The cost-intensive investment of housing can jeopardize a family's finances and savings.
The property can be illiquid because it cannot be monetized easily. Financial investments such as,mutual funds or fixed deposits do much better in this regard.
And since the prices are so steep that housing becomes the primary source of savings for many households that may not experience rapid wealth growth, housing becomes the primary form of savings.