Can a Rs 3.5 cr flat fit your Rs 80 lakh income and Rs 4 cr portfolio? Expert weighs in

We’re a couple in our late 30s with no kids, earning about Rs 80 lakh annually, mostly from my Rs 70 lakh income. We have a Rs 4 crore portfolio split across Indian equity, debt, and foreign equity, and a monthly take-home of around Rs 3 lakh plus bonuses. We’re considering buying a Rs 3 crore flat, which might total Rs 3.5 crore after all costs. Given our income and investments, is this realistically affordable without dipping into family support?

Advice by Animesh Hardia, Senior Vice President, Quantitative Research at 1 Finance

As a couple in your late 30s with an annual income of Rs 80 lakh and a Rs 4 crore portfolio, considering a Rs 3.5 crore flat is a significant move. This would require a minimum down payment of Rs 1.2 crore (on top of Rs 50 lakh as additional costs) to make your EMIs affordable.

When considering such a substantial purchase, it’s crucial to look both within your current financial situation and beyond the immediate numbers. Here are the important aspects you should consider:

– Your primary goal should be to enter a debt-free retirement. A 20-year home loan taken in your late 30s means you’ll be making payments well into your late 50s. This aligns perfectly with a typical retirement age, ensuring the EMI burden won’t carry into your retirement years.

– A home is a major milestone, but it’s not your only one. With no children, you benefit from significantly reduced financial pressures related to their education and marriage. This frees up savings for your home loan payments and other aspirations like travel and leisure, car upgrades, high-end gadgets, and retirement.

– Drawing Rs 1.7 crore from your current Rs 4 crore portfolio (for the down payment and other expenses) is a considerable sum. While the remaining Rs 2.3 crore is substantial, your consistent further investments over the next two decades will appreciate your portfolio to fund your retirement.

A retirement corpus for a Tier-1 city in the mid-2040s might typically range from Rs 8-10 crore with dependents. However, for a couple like you without children, particularly if you consider retiring in a Tier-2 city, your required corpus could realistically drop to Rs 5-7 crore.

– A home loan of Rs 1.8 crore at 8% interest rate for 20 years would result in an EMI of Rs 1.5 lakh. With a Rs 3 lakh monthly take-away + bonuses, a proper home loan repayment strategy would make the EMIs affordable and also reduce the total interest payable.

To make a truly informed decision, it’s highly recommended to consult a qualified financial advisor. They can help assess your current financial standing, understand your specific needs, and create a comprehensive roadmap for your investments, home loan, and retirement, ensuring your home purchase is a realistic and stress-free goal. EMI mustn’t become a financial burden, causing financial stress and impacting your peace of mind.