There is a school of thought that states that you should buy a home as soon as you can afford it, or as soon as your home loan application is approved. In fact, the only question one tends to ask in context with home buying is whether the property prices and interest rates are amenable right now. On the surface, this makes sense. However, not all surfaces are reliable mirrors.
From an investment point of view, buying a home is often likened to buying gold and putting it in the bank. That is true to some extent. It is a well-known fact that rates on the real estate market go nowhere but up with the passage of time. In other words, buying property today does make a certain amount of financial sense. But that’s not all there is to it.
Owning a residence means security – and security is important to any family, in any generation. It is one of the few long-term investments with practical utility - after all, you’re not going to put the flat in a bank while it appreciates in value. You’re going to live in it.
But the fact that property investment does not pay off before a certain amount of years have passed should be kept in mind. Before actually utilizing your loan or putting your own money down, consider whether your overall situation is sound enough to allow you to wait for such a period before selling.
The times when the typical Indian family was one of the most constant and reliable bets going have unfortunately passed. Nor is employment stability what it used to be.
So what does this have to do with buying a home?
THE JOB FRONT
The reason why a home loan company digs so deep into the nature and situation of a client’s job is that they need to gauge how reliable a risk he is. There are certain classes of jobs that inspire more confidence, due to the stability they offer to the employee.
This stability is not judged by the take-home income figure, but by potential consistency. Therefore, if you are applying for a home loan, it would be best to make a personal evaluation. If you are a frequent job-hopper, suffer from poor health or have a long history of dismissals, you would do well to set your career situation in order before actually applying.
Even if your application has been passed, how well equipped are you to pay the EMIs? With the loan granted, you could avail of it more productively when things are a little more stable on your professional
front.
Another factor to consider is the peripheral expenses. To begin with, if you are using the services of a real estate broker, you will be liable to pay him a certain amount of money once the deal is finalized. There are also various legal formalities, including property and registration taxes, to cover. Are you in a position to handle them as and when they arise?
THE HOME FRONT
There are both practical and less definable reasons for assessing your marital situation before
contemplating the purchase of a home. A shaky or distressed marriage is definitely not conducive to making four walls into a home. The contemporary Indian mind assumes that marital problems will automatically smoothen out once the decisive step of buying a home is taken. The facts state differently, but that is not the point. Let us consider the purely
financial point of view.
Many couples take out joint home loans. When a marriage is stable, this does have many advantages. When it is not, the consequences can be quite disastrous. Payment of EMIs in case of separation or divorce can become a major legal issue.
Even in the case of outright purchase, actual ownership of the property if the marriage dissolves will be the subject of dispute. Hoping that buying a home will set a disturbed family situation right is akin to hoping that water will miraculously flow upwards if the right kind of pipe is installed.
THE ‘CULTURE SHOCK’
Yet another reason to think long and hard before actually investing in a residence would be sudden geographical change. One major mistake repatriating NRIs usually commit is to buy a home arbitrarily, without considering the possible culture shock.
The fact is that they have spent a minimum of five years in a foreign country, which means that they have assimilated that country’s culture and adopted a certain lifestyle. Such a culture and lifestyle may be hard to replicate in India, no matter how progressive the city
of choice is.
The same feeling of alienation and displacement can overwhelm property buyers who decide to settle down in an unfamiliar city or even state, without familiarizing themselves with the new area of location.
Finally, the financial investment angle. If you ask a financial consultant about whether the time is ripe to buy a residence, he will probably raise only one point – will you be able to keep the property long enough to make it pay as an investment? All of these factors are worth thinking about before actually taking the plunge of buying a home.
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