Buying a Rs 1 crore home can feel like a major financial milestone, but being able to buy a property does not necessarily mean you can comfortably afford it. Before taking the plunge, it is important to assess whether your income can cover the EMIs and other expenses without stretching your finances. Here is a look at what the numbers could mean in practice.
The Down Payment is Only the Beginning
Let us assume that you purchased an apartment worth Rs 1 crore and deposited a down payment of 20%, or Rs 20 lakh.
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The initial cost does not end here. Stamp duty, registration charges, interior design charges, and moving charges can also add up to hundreds of thousands depending on the location of the property. This means that before you pay your very first EMI, your savings might take a hit.
What Will Your Monthly EMI Look Like?
Imagine you take a loan of Rs 80 lakh at an annual interest of 8.5% for a period of 20 years. In that case, your EMI per month comes to about Rs 69,400.
Over the period of 20 years, you will be paying around Rs1.67 crore, including Rs 87 lakh in interest. This excludes the down payment and other ownership costs.
If your salary after deductions is Rs 1.5 lakh, then after paying the EMI, you have Rs 80,600 remaining. This is where affordability becomes important
What If You Rent a Similar House?
Assuming you rent the same apartment for Rs 30,000 per month, then this is Rs 39,400 less than your EMI every month. You can invest this money into various investment products such as mutual funds and bonds. Also, you can save for a rainy day or allocate it to other purposes.
However, rentals may go up with time, and returns from investments are not always guaranteed. Buying also allows you to build up equity through your EMI payments.
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Don't Overlook Maintenance Costs
Homeowners must budget for repairs, society charges, property tax, and occasional major expenses. Even setting aside Rs 5,000 monthly for maintenance and related costs adds Rs 60,000 a year.
Buying makes sense when you can manage the EMI, retain emergency savings, and plan to stay long enough to justify the costs. Renting may be smarter if buying leaves you financially stretched.
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