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Investments Options to Buy a house in India

Buying a house is every Indian’s dream. Know how you can systematically save and invest in financial tools ULIP, mutual funds, stocks etc. to buy a house in India.

  • 6,143 Views | Updated on: Jan 11, 2024

When you are planning to buy a house, it should be backed by strong financial support and ideally, you must plan in advance for this purchase. A sudden decision to buy a house might land you in a financial imbalance and can lead to trouble. Even when you are opting for home loans, you must be cautious and explore all the avenues to ensure that it won’t impact your financial stability and you can easily manage the timely repayment. Thus, it is very important to have financial planning to buy a house in advance. Now the questions that arise are what are the investments for buying a house, which investment options to buy a house in India are considered good picks, and how to do financial planning to buy a house.

Before we move on to discuss the investment options to buy a house in India, here is a list of seven important points that you must include in your financial planning checklist for buying a home in India.

Evaluate your monthly expense for the household

If you are planning to buy a house you must be quite clear that it is a huge stretch for your financial stability. This is because the EMIs that you will be paying will be quite heavy. Also, since property prices in India are quite high, you cannot use your savings directly to buy a house, as liquidity is a very valuable financial asset. So you must try to control your household expenses and cut them by as much as 25% to 30%. You can use this amount towards the repayment of your loan. It is a little tough to change the living style that you are used to, but it can be a great addition to the loan repayment fund.

Your contribution to the loan amount

Currently you can get as much as 80% of the property value as loan amount from the banks. Meaning that you will have to contribute 20% from your pocket. On one hand, you must ensure that you have the amount of your part in addition to your savings and investments. On the other hand, experts advise that you must try to contribute a minimum of 40% and take a loan of only 60% of the property value from the banks. In addition to this 40% down payment, you must also take care of additional costs like stamp duty and registration charges among other costs.

Planning for liabilities for the next 6 months in advance

A financial plan for liabilities like household, education costs, travel expenses, and insurance premiums should be accounted for by making a list of these. It is highly advised to keep an amount reserved for these important time-based liabilities that cannot be delayed.

Ongoing loans/debts

It is advised that before you plan to take a loan to purchase a house, you must be free of all your debt-related liabilities like a car loan, personal loan, etc., as it would be way too heavy to serve two or more loans at once and you might end up landing yourself in a financial debt. Also, ensure that you maintain a good CIBIL score on your previous loans, as it will help in getting a loan at a chapter interest rate.

Keeping 3 months EMI in reserve

As a good practice, it is advised to keep an amount worth three months of your house loan EMIs in reserve. This will act as a backup in case of a sudden financial emergency. Moreover, it will give you enough time to manage things and overcome your financial issues.

Regular source of Income

Since you will be incurring a huge financial burden of repaying a huge amount, Home loans even at 60% of property value can easily exceed ₹50 lacs amount. You must ensure that you have a decent and regular source of income.

Emergency funds

We all know that life is uncertain and one can meet an emergency situation at any time. Thus, it is advised to stay invested in short-term financial tools like Bank FDs, Mutual Funds, etc., which can be easily liquidated to have health and life insurance for all members.

What Are The Investments For Buying A House

There are a number of investment options available for people looking to buy a house in the future. As mentioned above, financial planning to buy a house is a very important part of your journey to own a home. Let’s have a look at the best investment options to buy a house in India:

ULIPs (Unit Linked Insurance Plans)

Undoubtedly, ULIPs are a great tool for financial planning to buy a house. They are considered one of the best long-term investment tools that offer you a great return. This will help you in accumulating a decent fund while matching the growth of market-linked units.

Systematic Investment Plans (SIPs)

The toughest part about financial planning to buy a house is accumulating a fund large enough to make a down payment for buying a house. SIPs are the best investment options to buy a house in India. They help you in accumulating a decent amount faster than any other investment option.

Fixed Deposits (FDs)

Many investors can manage a medium risk appetite. Some prefer low or no-risk options. In such cases, Fixed Deposits serve as one of the best investment options to buy a house in India. While providing a decent return, they are a safer and a secure long-term investment option for buying a house.

Guaranteed Savings Plan

You can invest in a guaranteed savings plan that offer guaranteed returns along with an insurance cover. Not only that, if you invest in time, you will surely be ready to buy a home in the upcoming few years. The right sum will help you plan your house and also help you save regularly.

Conclusion

While there are many other investment options that people may prefer as investment options to buy a house in India, the answer to this burning question is still linked to your long-term financial goals and planning for buying a house.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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