Owning a house is one of the biggest life goals for many of us. However, given the exorbitant prices in real estate, it is a challenge to buy an apartment. Even in today’s depressed market conditions, a one BHK flat in the distant Mumbai suburbs can cost Rs. 1 crore, making it quiet unaffordable for the middle class.
The key is to plan savings and investments efficiently to achieve this goal.
We spoke to a few advisors to understand how they have managed to help their clients fulfil their dream of buying a house.
Jignesh Shah, Gujarat, President-South Gujarat IFA association
Buying a property in the current market conditions is tough but not impossible. I believe proper planning can make this goal easily achievable. When clients come with the goal to buy a house, they are often intimidated by the prevailing rates in the real estate space.
Couple of years back, I met a client who was a salaried employee. Though he was originally from Gujarat, he is now settled in Mumbai. Since he has been working in Mumbai for many years, he wanted to own a house in Mumbai someday. The thing that worried him was that the real estate rates were much higher in Mumbai compared to Gujarat and he could not pay for a house in full.
His goal was to own a house in the next 10 years. We conducted a few meetings with him to understand his income pattern. We figured out the price of one apartment after a decade after factoring in a minimum 7% inflation annually in the value of an apartment.
Simultaneously, I took stock of his investments. My main motive was to make the client develop the habit of investing without worrying about returns, especially in the short term.
I estimated that the apartment he wished to buy would cost him around Rs.1.5 crore. Considering his monthly expenses and other priorities he was left with a set amount which I advised him to start an SIP for 7 years. With this, he was able to save enough in the next couple of years for the down payment for the house and later pay the remaining amount through EMI.
Since his goal was long term, I allotted the entire amount to a balanced advantage fund that would give a higher exposure to equity.
Along with this, I ensured that the client had adequate health and term cover in place to secure his family’s interest.
He was regular with his SIP; in fact, he increased the investment amount after a couple of years to reach his goal before time. Currently, he is very close to meeting his goal as he has accumulated the amount to buy his dream apartment in Mumbai.
Sudhanshu Sekhar Mohapatra, Odisha
I met this client 10 years ago through a referral. He had two goals - his daughter’s education and building a house. (Most people in Odisha prefer to construct a new house than buy an apartment.)
Since he was working in a railway department, his insurance and pension were taken care of. Before approaching me, he used to invest around Rs.12, 000 in a provident fund that would give him 8 to 8.5% returns.
To enhance his returns, I suggested to him to invest that amount in equities for the long run since that would give him better returns.
Given his goal was to buy a house over a period of 10 years, I allotted the entire amount into multi and mid-cap schemes. After 7 years, as he was reaching closer to his goal, I started shifting small amounts to debt schemes to secure the accumulated amount.
With his continuous investment for 10 years, he has now collected around Rs.30 lakh, enough to build his own house. He now redeems a small amount from the investment as per his requirement for construction.
However, he has not stopped his SIP, as he now wants to build a corpus for his son’s education.
