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POSTED BY ON February 11, 2012 7:04 am COMMENTS (5)
Hi,
I have no sentiment of buying a home. But considering the society, which gives value to me if I have a home, Iam thinking to buy home. (may be useful for valuation of my child at the time of his marriage)
But in investment point of view, I want to know whether it is good decision?
I have to stop my SIPs to pay EMIs, if I took home loan
My savings portion will fall down.
Ofcourse I will get tax Benefits (Iam in 10% slab)
I will give any additional details, if required
Request your advice
Thank You
R Siva Prasad
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Dear Siva, please feel free to post your queries here. All of us ‘ll be more than happy to help you.
Thanks
Ashal
Hi Ashal,
Thank you for your conclusion.
Now I got confidence that Iam right.
Thank You
R Siva Prasad
Dear Siva, as you are asking specifically for investment purpose, NO, the house buying decision is not a good one. Also for the associated tax benefit on home loan as you are in 10% slab as on date the relative tax benefit is almost negligible to you. For the full 1.5L Rs. limit of interest for a self occupied, your tax saving ‘ll be merely 15450 Rs.
On the other hand, if you are not investing in a house & keep investing in your SIPs, you practically have around 134550 Rs. to invest in. i.e. almost 11200 Rs. per month. Over a 20Y period, this 11200 Rs. mly invest ‘ll grow in to a big corpus of 1.1C Rs. for 12% yly growth rate.
Thanks
Ashal
A cover over the head is a MUST for everyone. Actually – psychologically – whether one agrees with this or not – A home is the ultimate haven. Also you wont ever fret that the value of you home fell by Rs.20 per suare feet any day in your life – unlike what happens to your stock portfolio!
I dont have the link off-hand but in a research in the US over 30 years [1972-2002] it was found home owners have outperformed the investment performance of renters over a long run. There is no direct conclusion but an indirect conclusion is that owning a home gives that stability in life to make better thought about decisions in some sense. [Also you MUST read One up on the Wall Street by Peter Lynch].
It is a difficult choice if you have to forego MF investments altogether. Would a choice of a smaller home put some money into your pockets for SIP – if so I would buy a smaller house. Perhaps you can put off that home buying decision by 3-5 years and createS SIPs to fund the down payment? Perhaps search for a job that pays more? Or perhaps increase your skill set to land a higher paying job?
My recommendation: Dont take your eyes off that goal of owning a home. Just delay the purchase if need be BUT dont lose sight.
If you are one of the few who derive their own worth by ‘abnormal’ values, welcome to minority. Always remember ‘kuch to log kahenge, logon ka kaam hai kahana…’
Investment-wise, you are correct in thinking that buying a house is not a good deal because of the opaque process.