Property Investment? How soon is too soon?

property

Are the young buyers in India thinking about investing in a property too soon? Young couples face a nasty and unjustified pressure in balancing financial and psychological needs especially when it comes to buying a home or investing in a property.

Mainly due to the many positives associated with it. For example: security, wealth creation, social status and discipline.

 

The safety and comfort of owning a home paramounts every other aspect of life.  Career, love for a hobby, entrepreneurship, travelling or the owning of wealth as assets in the market or as goal based mutual funds are considered only second best or worse even second last or last.  Young couples who are entangled in a mesh of EMI’s which certainly includes the home loan EMI would want to shout from their rooftops about pausing or postponing on the idea of buying a home! True, simply because of this highly damaging mistake of theirs – ‘Buying too high too early’ and in most cases ‘buying too early’

However, the eternally security-seeking Indian attitude belittles these sufferings as temporary sacrifices for permanent or long term benefits. Owning a home means not having to deal with the fear of ‘being casted out on the streets’ when adversity strikes.

So why do we still think of it as a decision which can be timed better?  The young and energetic who are in the prime of their lives and amidst so many successes like a good job and a life partner, tend to overdo this. Many who invest in a property do not see the inherent risks.

  1. A career or job change: A home loan commitment runs for a minimum of 15 years. EMI’s will mean that your bank account is adequately funded every month come hail or storm. In today’s scenario recession or retrenchment are a few perils that are capable of extracting every penny in your account. Taking a break to study and upskill or get a certification in your area of expertise will become a dream. Taking up a job in a different city too will be a problem with a home loan, if you do not find a suitable adjustment on the rent front and especially when you have your spouse’s office close to home. A long distance relationship is complicated enough with the partner unable to find a job in the same location.
  2. Shoot up in budgets: Social pressures and unexpected illness or job loss puts tremendous cuts on the budget and spends exceed income leaving zooming credit card balances. Moreover, in households where the EMI commitment is borne by one partner and the household expenses by another, a job loss can put extreme pressure on the finances.
  3. No investments and nothing to liquidate during crisis: All the money saved would have gone towards the down payment of the home loan. Their salary every month would hardly render a decent saving for any investment and any unexpected twist and turn in career or in the health front would leave them debt ridden. All this points to them banking all their money in the form of one single asset which is under a 15 or 20 year loan. A fixed asset that is absolutely difficult to liquidate.

 

Prioritizing Financial and psychological needs:

Yes. Prioritizing needs and goals is a thing the young investor or the young couple must learn to master. The first ten years in anyone’s career has a lot of uncertainty with a huge growth potential. It is important for couples to wait until they stabilize in their careers before committing to an investment as big as a housing loan. Locking all their money and future income in home is not a wise decision.

Harshit and Anjana waited for a good ten years before they bought their dream home. Buying into the social pressure they invested in a tiny single room apartment 5 years after they were married. The margin money was funded by their savings. The EMI wasn’t a burden and they looked at that home as an investment and did not do much on furnishing. They sold the flat 6 years later to finance their dream home. The proceedings from that flat funded 50% of their new home and they ended up with almost the same amount as EMI for the new home. They braved the psychological pressure of having to connect with a home emotionally and looked at it only as an investment. Harshit and Anjana did not yield to the societal pressure when all their colleagues invested in bigger flats or apartments in a gated community with all the amenities.

They sold the flat 6 years later to finance their dream home. The proceedings from that flat funded 50% of their new home and they ended up with almost the same amount as EMI for the new home. They braved the psychological pressure of having to connect with a home emotionally and looked at it only as an investment. Harshit and Anjana did not yield to the societal pressure when all their colleagues invested in bigger flats or apartments in a gated community with all the amenities.

With time and enough cash in their hands they focused on their career, travelled, upgraded their skills and moved to a bigger metro for exposure and experience. This acted like a spring board rewarding and awarding them with a better career. By the end of ten years their investments in the equity markets grew and their financial portfolio had diversified asset classes which are now stable, return yielding and secure!

 

 

 

 

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