Post Covid-19 – Eight reasons you should buy yourself a home
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Post Covid-19 – Eight reasons you should buy yourself a home

General– The aim of the blog is to explain why one should own a house, more so now (post Covid-19 scenario) than ever before. The statistics say that an average Indian family, in the Income bracket INR 30,000 to INR 1,00,000 per month,  spends 15 to 20 percent of its income on Rent. This is a huge outflow. As per the experts, the economic scenario Post Covid-19 entails lower family incomes. However the Residential Rental values are unlikely to fall. This means that the average family Rental outflow will increase, and could go up to 18 to 23 percent of the family income.

Post Covid-19 Scenario w.r.t the Economy, Jobs and Businesses – The experts are of the view that:-

  • The Corona virus is going to leave a lasting imprint on the Economy, both global and regional.
  • The Jobs and business landscape is likely to get altered. An altered business entails rewriting the Business Models, high Capital spending and low Revenues till the business finds traction. Altered job scenario can lead to initial lay-offs, long periods of unemployment, reskilling/up-skilling, training etc. etc.
  • Both the Private and the Government Sector can resort to Salary cuts. As I sit down to write this blog, there is a news item that Telangana Government plans salary cuts. (Refer link:  https://www.ndtv.com/india-news/telangana-announces-big-salary-cuts-amid-coronavirus-outbreak-2203232 )

There will be an Economic slowdown for sure, and in all probability a Recession looms large on the horizon.

Outcome – The average family incomes are going to reduce, especially in the large unorganised Sectors. It is thus imperative that the families should cut down on the Rental Costs. Better still would be to buy a house for themselves within the same outflow (rental).  

How will the Residential Realty Sector fare, Post Covid 19The post Covid scenario is bad for Residential Real Estate.  (Refer link : https://realty.economictimes.indiatimes.com/news/industry/covid-19-may-worsen-woes-of-residential-real-estate-sector-icra/74857232 ). The Residential Real Estate will see:-

Eight reasons you should buy your own house NOWAt low purchase rates and low bank loan rates, increased affordability of Real Estate may be the only silver lining to the dark Corona cloud. The eight reasons are:-

  1. Real Estate is the only asset, wherein the Government funds your purchase, by way of a loan and also giving attractive exemptions on repayment of instalments.

2. Realign your fixed rental outflows; meaning instead of the amount you pay as Rental, pay bank EMI for your housing loan.

Let me explain this point with the help of this example:-

  • Your family income   — –   INR 1,00,000 per month (say)
  • Present Rental      —-  INR 20,000 per month (average Indian family spent having 1,00,000 per month income)
  • Taxes you pay on Salary — INR 10,000 per month (approx)
  • Total outflow  = Rent + tax = INR 30,000 per month.

Now this is how you can purchase your own house within approx the same outflow.

  • Average cost of a ready to move in apartment on Airport Road, Mohali is 45 Lakhs, for property that would earlier be available at 50 lakhs.
  • Bank Loan –—-  36 Lakhs ( 80 % percent of property cost)
  • EMI (@ 8% int. Rate) —- INR 29,000 per month (for a 20 year loan period)
  • Tax on Salary — INR 3000 per month (approx) {after tax exemptions under (24 (b) and 80 EEA, on Interest component of home loan) AND (80 (c), on Principal component of Home loan}.
  • Total outflow – Rent plus tax – INR 32,000 per month.

It is thus seen that almost within the present outflow, one can purchase an asset that hitherto-fore costed 50 lakhs. Your take home salary remains the same post the purchase of the property.

3. Fall in Real Estate rates post Covid-19.

4. In times to come the Rentals are going to increase while the EMI is going to be the same for the next 20 years, giving you a positive monthly cash flow.

5. The rentals you are paying now to someone else will be used to own an asset for you.

6. Increase in value of the house will create wealth for you in the long run.

7. By just investing 09 lakhs one can own an asset worth 50 Lakhs.

8. The Government has reduced interest on small savings scheme to 7.1%. (Refer link: https://inshorts.com/en/news/interest-rates-on-small-savings-schemes-reduced-ppf-to-fetch-71-1585675866298 ).

Conclusion – There is a famous saying by Mark Twain, “buy land – they are not making it anymore”. Investment in Real Estate is a time tested investment.

Col. CVS Sehgal

Real Estate Consultant

Whatsapp/Call  for appointment or for telephonic free consultation –  97791-10555

E-mail – cvs@greenberet.in

Blog – cvssehgal.com

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