Home Buying Tips

1. Is real estate a better investment as compared to the stock market?

The real estate market is similar to the stock market, with its peaks and troughs always seeming to make perfect sense in retrospect. Also, both markets reflect the economy of the country and offer good investment opportunities. However, the risks must be understood along with the opportunities. Realty index will appreciate five times, but not the stock market.

Investing in stocks:

The profit margin inherent in stock investment has always been higher when compared to other asset classes. Stock market investments offer advantages such as liquidity and flexibility, which real estate does not. Stocks also offer growth rates that the real estate market can rarely match

Investing in real estate:

Home ownership is the most primary form of real estate investment. Unlike stocks, real estate is a tangible asset that provides for greater psychological comfort, security and satisfaction. Also, the return on investment for real estate is reasonably consistent because of the phenomenon of property appreciation. Stock markets are far less predictable.

2. What per cent of total income should a person in the age group of 25-39 years invest in real estate?

At a young age, you can invest 300 per cent of your total assets by borrowing for your first house. Experts believe that your total monthly instalments should not exceed 30- 35 per cent of your gross monthly income. This is a good starting point and you should work towards reducing that number over a period of time.

3. What per cent of total income should a person in the age group of 40-60 years invest in real estate?

At a young age, you can invest 300 per cent of your total assets by borrowing for your first house. Experts believe that your total monthly instalments should not exceed 30- 35 per cent of your gross monthly income. This is a good starting point and you should work towards reducing that number over a period of time of the city, if it is from a good developer and fits your budget, but at the launch stage and when you exit, you get some value appreciation. That becomes your seed money. Most banks allow you to exit one loan and take another. So, you can sell off the smaller priced property in a peripheral location and use that as seed money to buy where you would like to stay. Else, you will always be behind the market in terms of finance.

4. What is the best way for a first-time buyer to set a budget to purchase a home?

Many new home buyers get excited and forget to consider the amount of cost they need to pay to acquire a home. Over-expectation from your income can put you in a financial stress. Your EMI should not be more that 30-40 per cent of your take-home salary. If the property markets in your city are very expensive and you cannot afford the property that you want to stay in, invest in whatever is affordable even in the periphery of the city, if it is from a good developer and fits your budget, but at the launch stage and when you exit, you get some value appreciation. That becomes your seed money. Most banks allow you to exit one loan and take another. So, you can sell off the smaller priced property in a peripheral location and use that as seed money to buy where you would like to stay. Else, you will always be behind the market in terms of finance.

5. When is the stamp duty supposed to be paid?

In general, there is Stamp Duty to be paid every time there is a transfer of ownership. It is calculated on the basis of the total value of your property. The amount to be paid varies from city to city.

6. What are the factors that one should consider while calculating the home loan instalment per month?

For calculating the monthly home loan instalment, consider your monthly family income - now and expected in the future. Family income includes yours as well as your parent's or spouse's income. Secondly, your family's current expenses, including all other loans you are servicing, are very important to be considered. Do not spend more than 50 per cent of the total income on a monthly EMI.

7. Why do banker's home loan interest rates differ?

Most often your own bank (e.g. where you have your salary account and most banking relationships) will give you the best interest rate. Also banks have preferred or invitation pricing and you can benefit from these special schemes.

8. Can I enter into a sale agreement with any buyer without clearing the mortgage? What will be the modality of the transaction?

Remember to value the said property which is mortgaged to a bank. In the first place, you will be required to clear the loan of the bank and then proceed to register the property in the name of the buyer. It is also possible that you, the new buyer, as well as the bank execute the agreement simultaneously.