Age is on your side


Home, House

   In order to maximise investment and develop a strong investment portfolio, young buyers should start investing at an early stage of their career.

   Owning a home, especially the first home, is an essential part of the great Indian dream. It is the coming of age for every Indian, thereby announcing his arrival towards a stable and an economically successful adulthood. Owning a home communicates economic security and a successful social integration like no other rite of passage does in our country even today.

   A typical home-buyer purchasing his/ her first home in urban India is usually a couple in their early 30s who may or may not have double income streams. They wait for a few years after marriage for stability both, in their earning ability, as well as on the personal front, before deciding that the time is right to take the plunge into the big daddy of investments – a home. By this time, they have already spent at least five-10 years working to generate decent savings. However, once the decision is made and they are scrambling around for funds to make the initial down-payment, they ask the all-important question to themselves – where did all my earnings go?

Start early – to carve an ideal balance between investments and expenditure:

   If instead, the young person took the same decision early in his/her career, the unaccounted-for earnings would have found their way to paying for the mortgage. This not only introduces and necessitates fiscal discipline in the home-owner’s life, but also comes with the added advantage of providing a home for him/her for life. So instead of a significant chunk of the monthly salary going into rent, it goes towards paying for an investment that has the added utility of providing a roof over one’s head.

Start early – a longer runway to pay off EMIs:

  The younger the home-owner is, the longer is the tenure of the home loan he/ she will receive. This equates to lesser Equated Monthly Installments (E M I) amounts, which in turn boosts the affordability of the home being bought and also gives the borrower a longer runway to pay off EMIs.

Start early – to maximise on tax benefits:

   As a salaried individual, taking a home loan also means getting immediate tax benefits – earnings that would otherwise go in tax paying can instead be used to pay for your home. Under Section 24 of the Income Tax Act, home-owners can claim a deduction of upto Rs 2 lakh on their home loan interest if he or his family resides in the property. Additionally, they can claim a tax rebate of upto Rs 1.5 lakh on the principal repayment under Section 80C, while first-time home-owners can avail additional tax benefit of upto Rs 50,000.

Start early – to beat the increase in realty prices:

   Starting early means working the demographics in one’s favour. India is currently undergoing radical economic and social change and is among a handful of South Asian countries that sits on a demographic goldmine, with a median population age of 27.3 years. At 400 million and growing, it also has the largest number of millennials in the world.

   As the demographics play out, and nearly 5 million people are added to the labour force every year, the housing market is set to get more competitive with every passing year. India’s fast-growing consumer market is being driven by rising affluence, continued urbanisation and a fundamental shift in the family structure towards nuclear families. These factors are also influencing the home-buying market, leading to constant increase in realty asset prices, which works against home-buyers who delay purchase decisions until later in life.

Start early – government subsidies makes the EMI cheque smaller than the rent cheque:

   The alternate to buying a house is renting one, which from a long-term financial, security and investment perspective, does not work in favour of the individual. Psychologically too, owning a home often imparts a sense of stability and belongingness. All of this contributes to a stable environment that can be an emotionally satisfying experience that renting a house can never provide.

   Taking a home loan is also being made easier and a less cumbersome process. Thanks to the Pradhan Mantri Awas Yojana (PMAY) scheme and other tax benefits, first-time home-buyers have the benefit of getting home loans effectively at 0.34 percent for a home loan of Rs 24 lakh at 8.5 percent interest for a 30 year period.

Start early – grow your money as the value of your property appreciates:

   We Indians traditionally have a strong relationship with our land, given our predominant agricultural roots, which still rule the Indian psyche when it comes to home ownership. Land or homes are correctly perceived as security against critical times in life and in a growing country like ours, is guaranteed to appreciate in value as an asset class for the medium to long-term, given India’s secular long-term growth story. Having your own home not only secures your finances, it also helps your money grow as the value of the property generally appreciates.

   All these point to the fact that buying a home in your mid 20s is the smartest financial decision you will make. Needless to say ‘the pride of owning a home comes for free’.

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source: The Times of India

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