Buying a Rs 1 crore house on a Rs 1 lakh monthly salary may be mathematically possible, but the size of the home loan and down payment can determine whether the purchase is financially manageable.
The EMI can take more than half of a Rs 1 lakh monthly salary if the buyer makes a smaller down payment.
The affordability of a home depends on more than its price. Monthly income, existing debt, household expenses and savings available for the down payment all affect how comfortably a buyer can service a home loan.
Rs 75 Lakh Loan
Consider a Rs 1 crore property with a Rs 25 lakh down payment. The buyer would need a Rs 75 lakh home loan.
Assuming an interest rate of 7.75% and a 30-year repayment tenure, the EMI on the Rs 75 lakh loan would be about Rs 53,731 a month.
Over the full tenure, the borrower would repay about Rs 1.93 crore, including around Rs 1.18 crore in interest.
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For someone earning Rs 1 lakh a month, the EMI would account for more than half of the monthly salary. That would leave less than Rs 47,000 for household expenses, insurance, investments, emergencies and other commitments.
The loan may therefore be mathematically possible, but the EMI could put significant pressure on the monthly budget.
Bigger Down Payment
A larger down payment can reduce the amount that needs to be borrowed and, in turn, lower the monthly EMI.
For a Rs 1 crore property, increasing the down payment to Rs 40 lakh would bring the home loan requirement down to Rs 60 lakh.
At an assumed interest rate of 7.75% and a 30-year tenure, the approximate monthly EMIs would be:
- Rs 75 lakh loan: Rs 53,731
- Rs 70 lakh loan: About Rs 50,150
- Rs 65 lakh loan: About Rs 46,570
- Rs 60 lakh loan: About Rs 42,985
Moving from a Rs 25 lakh to a Rs 40 lakh down payment would reduce the loan by Rs 15 lakh and lower the monthly EMI by roughly Rs 10,700.
For someone earning Rs 1 lakh a month, that reduction could make a meaningful difference to the monthly budget.
Affordability Vs Eligibility
Being able to take a home loan is not the same as being able to comfortably afford the property.
A person earning Rs 1 lakh a month may be able to borrow for a Rs 1 crore house, but an EMI above Rs 53,000 would leave limited room for other financial goals and expenses.
If the buyer does not have Rs 30-40 lakh available for the down payment, purchasing a Rs 1 crore property on a single Rs 1 lakh monthly salary could be difficult without significantly cutting back on other spending.
Building a larger down-payment corpus first can reduce the loan requirement and bring the EMI closer to what the monthly budget can accommodate.
Ultimately, the decision depends on the buyer's priorities. Some may choose to reduce spending and buy sooner, while others may prefer to save more, borrow less and wait before purchasing a home.
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