Home buying is still a highly emotional affair, particularly in India and therein rises the question as to how much do people actually wish to spend for purchasing their dream homes. The idea of a perfect home is subjective but aspirations of people do not know any barriers, not even of the monetary kind if current trends are any indication. Homebuyers usually end up stretching themselves too thin when it comes to going for their dream apartments in metro cities as per several studies. Many do not even bother about future consequences for the thrill of immediate social elevation and the chance to pursue a better lifestyle.
Aspirations and dreams of property buyers have undergone a massive change over the last few years. Millennials and younger buyers prefer homes which are compliant with their own tastes and personalities. They are better read and more aware about global housing trends. They are highly demanding and have multiple choices at their disposal. Growing levels of income along with easy credit access are factors boosting these changing aspirations of customers. Most banks offer up to 80-85% of the property value as a loan and a major sum has to be given at the outset by the homebuyer as the down payment. However, people are still inclined towards going all out to acquire their dream properties. According to several studies 1 out of every 3 buyers of homes in the country puts in more than 50% of total savings for taking care of the down payment for a home.
Studies also report that to accumulate the money needed to make the down payment, buyers in cities like Mumbai, Delhi and Chennai will require anything between 7-12 years on an average. Yet people are not averse to sinking in everything for acquiring their preferred homes and also repaying a huge monthly EMI subsequently. It should also be remembered that premium homes come with higher charges by way of insurance and property taxes in tandem with monthly maintenance fees. Additionally, buying a larger home automatically means higher costs in terms of utility bills, repairs and so on.
Moving into a prime area means families automatically end up upgrading their lifestyles although their savings and incomes do not increase by the same margin. Home interiors also count for a major portion of the cost. Experts recommend that buyers should be more pragmatic. Liquidity levels are low in case of real estate and one should not be hoping to sell the property at a huge price in the future. One should also refrain from taking on a big home loan with the hope of a huge price rise in the future. Under construction properties are often delivered behind schedule and big home loans can pinch the buyer in such situations. Tax deductions for under construction properties are only Rs. 30, 000 on interest repayment until the building is fully built. Homebuyers should not think that their hard earned savings can be replicated and built all over again.
The key is to buy a home which one can strictly afford. Buying a smaller home initially can help you invest some amount into instruments which will help you get good returns. The dream home should now offer higher convenience than snob value and should have good resale value as well. First time buyers should consider homes which will serve them well for 6-7 years initially. Thereafter, they can always upgrade to a bigger home when they have better financial prospects. Expectations of buyers should be more realistic in the current scenario. There should be proper research done before buying any property. The monthly EMI should not cross 35-40% of one’s total monthly income.
Most people in the country sometimes wish to pay more than even 50% of their income as EMIs which is not a trend to be encouraged. People should know what they have in hand, the loan amount for which they are eligible and the interest amount that will be repaid. They should factor in other costs like stamp duty, registration, due diligence, brokerage, mutation, transfer, documentation and processing charges.