Skip to main content

Plan finances and manage Housing Loan EMI repayment well

The last few quarters have been quite tough for the people dreaming of buying a home. The interest rates on housing loans have gone up from the 2004-05 levels. Many people thought that property prices will come down significantly due to the rise in home loan interest rates. However, contrary to expectations, property prices have never come down significantly, and in fact, have gone up in many areas.

So what affects property prices?

Some factors that dictate property prices:


Rise in input costs


With the inflation ruling high globally (especially here), the prices of all basic commodities has increased quite significantly over the last few quarters. For example, the cost of labour, steel and cement has gone up quite significantly in the last few quarters. Due to higher input costs, builders cannot reduce property prices in their newly-launched projects.


Investments by foreign investors


Many foreign investors believe that there is huge potential in real estate and the returns will be quite attractive. Foreign direct investments in realty projects has increased quite significantly over the last few quarters as more foreign players are investing in real estate projects here.


Should you defer purchase?


Experts suggest that investors willing to buy residential properties should not wait. It is better to invest at current levels. The inflation rate is ruling at quite high levels (above 11 percent) and is expected to remain high in the short to medium term. This means the rise in input costs of properties will continue and builders will be forced to raise the property prices in future.


Also, home loans attract income tax incentives for the borrowers. This means it is good to invest early in property. However, investors should factor in some variables while going in for a home loan. As a home loan is a long-term commitment from the borrower, it requires proper financial planning. Typically, a home loan tenure is 15 to 20 years.


Some factors to consider while availing a home loan:


Scheme

First of all, a borrower needs to decide on whether to go in for a fixed or floating interest rate home loan. Usually, the rate of interest is 1-1.5 percent higher in fixed interest rate options. Borrowers with stability of income can go for the floating rate option while the risk-averse should opt for the fixed interest rate loans.


Plan finances

Due to the higher inflation rates ruling globally, the Reserve Bank of India (RBI) is bound to take tough monetary policy measures. As a result, interest rates might go up in the near future. Investors should factor in some interest rates hikes while calculating their equated monthly instalment (EMI) outgo. Usually, banks absorb small interest rate increases by increasing the tenure of the loan. However, in case of sharp rises in interest rates (seems unlikely from current rates) investors can look for partial pre-payment and partial increase in the EMI outgo.


As a thumb rule, the EMI should not be more than 40 percent of the borrower's take-home income. Also, since a home loan EMI is a long-term issue (usually 10 years or more), investors need to plan other expenses like child's education, marriages in the family etc and adjust their outflow accordingly


Investing in property


  • Invest early in property

  • Home loans attract tax incentives

  • Factor in some variables while availing a home loan

  • Decide on fixed or floating interest rate home loan

  • Anticipate interest rate hikes while calculating EMI

  • In case of sharp interest rate hikes, look for pre-payment and partial increase in EMI outgo

  • Plan a reserve pool for other expenses and commitments

Popular posts from this blog

NPS for Tax Saving

The NPS is a great way to save tax if you don't mind locking in your money till you retire. Till last year, the taxability of the NPS was a big issue. But last year's Budget changed the rules and made 40% of the corpus tax free. The PFRDA wants that the balance 60% to be exempt from tax as well. The emphasis is on increasing pension coverage. So, allowing EEE status (to NPS ) is our major demand (in the Budget NPS is especially useful for investors who may have exhausted the `1.5 lakh investment limit under Section 80C but want to save more.   Another way the NPS can cut tax is by rejigging the salary.If a company deposits up to 10% of the basic salary of an employee in the NPS under Section 80CCD(2d), the amount will be tax free. Turn to page 28 to see how much tax this can save. However, the take-home pay of the employee will come down. Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 10 Tax...

BHIM App

What is BHIM? BHIM stands for Bharat Interface for Money , which is an easy way of transferring money from one bank account to an other via a smartphone using the Unified Payments Interface (UPI) platform . It is an instant payments application meant for sending money as well as requesting for payments. How is it different from UPI? BHIM is no different than UPI. But in the case of BHIM, customers don't have to download mobile applications of multiple banks, instead a single BHIM app downloaded from Android Play Store is sufficient. Other than that, payments can be made through a virtual payments ID or through account number and IFS code, same as UPI. What you need to use BHIM? BHIM can be used across an droid smartphones with version 4.0 and above, also it will be made available on iPhones and Windows smartphones very soon. Further, for feature phone users they need to use the USSD feature by dial ing *99#. Why was the need for BHIM felt when UPI is already in place? With various...

Retirement planning from a long-term perspective

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds     `HOW green was my valley'. This title comes from a movie I had watched many years ago. A little boy's journey into adulthood and the story of a Welsh valley's turn of-the-century descent from pristine paradise to despoiled coal mining.   I thought of the title because it is comparatively reflective of a person's life ­ the glorious years when he is earning and the sun down years when he is not having his regular job and, hence, his living standards comes down. The reason is a combination of things. Inflation of food items, transport, increase in health related costs in the later years of life and increase in expenses in almost all basic amenities of life. In India, the social security system is almost non-existent. In some states, wherever it is available, the scales of benefits are extremely modest...

NRI from Canada and US Invest in Mutual Funds in India

Investing in Indian mutual funds by NRIs from US and Canada As of December 2016, eight Indian fund houses were accepting investments from US/Canada-based NRIs Most of the Indian mutual fund houses have stopped accepting funds from US and Canada based NRIs due to regulatory restrictions. This is because the Foreign Account Tax Compliance Act (FATCA) makes it compulsory for all financial institutions in the world to report comprehensive details of all transactions involving US/Canada residents, (including non-resident Indians) to the US & Canada Government. Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund

HDFC FOCUSED EQUITY FUND - PLAN A NFO

HDFC FOCUSED EQUITY FUND - PLAN A NFO opens today               Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot] Com OR Leave a missed Call on 94 8300 8300 --------------------------------------------- Invest Mutual Funds Online Invest Any Mutual Fund Online Download Mutual ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now