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View Poll Results: Home Loans in today's times: Are they worth it?
Do Not take a Home Loan, invest in retirement savings plans, etc. 10 19.61%
Take a Home Loan for a well developed area, it makes financial sense in the long run. 16 31.37%
Take a Home Loan, but not for a well developed, inflated area. 21 41.18%
None of the above, there are other ways of safe guarding your future. 4 7.84%
Voters: 51. You may not vote on this poll

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Old 24th September 2010, 13:29   #46
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Originally Posted by download2live View Post
Man I feel so poor.
Dont let such thoughts get into your head. Coming from someone who went through similar thoughts earlier, all i can say is rise above it, and do your calculations right. In my case, my wife is better at the number-crunching part, and so i entrusted her with it. Take stock of the situation, and do your homework by just looking at propeties on offer. Something will click. Textbook knowledg alone never helps.

For eg : The same project in which i have now bought an apartment, i had checked out when the work was hardly anywhere close to final about 2-3 years ago. Then, we never thought we could afford this place, and went about checking out different projects just for kicks. The process helped us learn about how the scene is like, and what different terms mean. Now, we managed to get the numbers right and have a house of our own.
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Old 24th September 2010, 13:48   #47
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1. One of my worst nightmare in buying a flat...
1. What happens when I can't repay the loan after certain period of time?
2. What options do I have if I need to sell or retain?
3. What happens to the interest I paid, I lost on it right? But atleast did I make it even?
4. Insurance? Does it help in this scenario in anyway?
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Old 24th September 2010, 13:54   #48
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Originally Posted by Gansan View Post
But my employer was giving housing loan at extremely attractive terms
Employers do that? Lemme chk out with mine.

Quote:
Originally Posted by aargee View Post
What he meant was, if the rate of outskirts increased by 50%, the places nearer to city would increase only by 10-20%.
Thats a new angle. Never thought about it that way. But yes. It makes sense.

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Originally Posted by phamilyman View Post
I have a simpler question dear D2L - if your wife and parents are adamant on a flat, then no numbers will convince their need for security.
True. Infact in my case the real push has come from my father who went livid when he heard the rent I will be paying at the new place I am shifting to. My wife happily jumped in to pump up the pressure even more.

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Originally Posted by benbsb29 View Post
Dont let such thoughts get into your head. Coming from someone who went through similar thoughts earlier, all i can say is rise above it, and do your calculations right.
Thanks for your kind words. Much needed light at the end of a tunnel. So from now on every Sunday is a hunt.

Milind Soman istyle:
If you are a flat, we are hunting.
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Old 24th September 2010, 16:04   #49
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Originally Posted by download2live View Post
You mean dual source of income with one member earning more than a lac as in hand salary??
If yes then I am out.
Me too out of this league, way out but that does not mean people like us cant afford a home.

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Originally Posted by download2live View Post
Thats a big concern for me. The ones by reputed builders like Shobha and company are supposed to hold on to their values well over years. And a good location also helps.

Thats why I wanted to go for a small'ish kind of flat from some reputed builders in a good location rather than a big one in some far off location.
But if the prices quotes by quadra are for a 2 bhk flat e.g. @50 lacs a piece in Shobha and company then well.......Its bye bye shobha and company for me.

Man I feel so poor.
As ben suggested, go for a okish kind of builder.

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Originally Posted by benbsb29 View Post
I disagree with the size of the apartment doesnt matter part. When we were looking out to buy an apartment, we had almost signed the cheque for the downpayment to a so-called budget apartment. When we gave it another thought we felt we were making a mistake since it was so tiny, that we would feel suffocated ourselves, forget the kid!

The sales guy who happened to be a Keralite himself took us into confidence and asked us not to go for it, as in th long run, we would not like what we are buying. Come to think of it, he was true.
True. The flat shouldnt be too small.

Quote:
Originally Posted by benbsb29 View Post
Agree with the first part, disagree with the second about the 6 figure income. Look out for a mid-level builder, and do check their track record as well.
As i see it, i think its necessary to have cash in hand. So after paying the EMI, bills, grocery etc, you should have something left. Ofcourse ben, there is a calculation involved here & i am just giving an overall picture.

Mid-level builder sounds like a plan but where are they, any names ?

Quote:
Originally Posted by benbsb29 View Post
For eg : The same project in which i have now bought an apartment, i had checked out when the work was hardly anywhere close to final about 2-3 years ago. Then, we never thought we could afford this place, and went about checking out different projects just for kicks. The process helped us learn about how the scene is like, and what different terms mean. Now, we managed to get the numbers right and have a house of our own.
I agree with ben here. Its very important to check out various properties before finalising one. Take your family along as well, more heads, more ways of looking at things. Have doubts, speak with the builder.

Last edited by quadra : 24th September 2010 at 16:08.
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Old 24th September 2010, 16:48   #50
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d2l,

Here are some tips for you, based purely on my own experience.

- My Dad always says, buy a house by the time you're 30, or when you get married, whichever comes first. Great advice (which I took, thankfully). The assumption is that by then, you will have some savings stashed away that you can use as the down payment, for furnishing etc.
- Don't aim for the moon. There is enough time for your "dream home" later. Buy something that you can afford. Typically the EMI should not exceed 40% of your take-home salary (my own guideline is 25-30% but I'm more risk averse than most!) This also helps in case of sudden recessions or temporary drops in property prices.
- This probably means opting for a "less popular" locality where infrastructure and "civilisation" may have not yet caught up with what you have got used to (alternatively opt for a smaller accomodation than what you are used to in a better area). Trust me, it's a small sacrifice- matter of time before the development catches up!
- Living on rent over the long term is the stupidest thing you can do. e.g. a 2BHK in a medium-range apartment in Bangalore would cost you a rental of about 15K a month. That is the EMI equivalent on a loan of 17 lacs. Stretch that a little, to say 25 lacs, and for an EMI of 22K a month (just 7K/month more than the rent you are paying) you can create an asset. Why should anyone even hesitate?
- Real estate appreciates with time, period. Who on earth told you about the "downward spiral"? My parents' flat in suburban Mumbai continues to apprecite after 30 years of construction. And there is always "redevelopment"!
- The longer you delay, the more expensive it will get. Creating an asset, however modest, will help you immensely while upgrading later.
- Your argument about paying nearly double for the house over 15 years etc. is specious. You're not taking into account the time value of money. In all probability you will pay off your housing loan before its tenure ( a 22K EMI today will not be as daunting as one 5 or 10 years from now)
- Housing loans are the cheapest form of debt available with (at least for now) associated tax benefits as well. If you MUST be in debt, get a housing loan. If you ask me, taking a loan at high(er) interest rates on a depreciating asset like a car is stupid. To the extent that you can afford it, buy cars for cash. Or take the bus!
- From a practical point of view, choose a project that has a low gestation period. This will reduce your pre-EMI burden (pure interest where you will not be paying back the principal). Also, the quicker you move in, the more you will save on rent. Move in while the builder is still open to taking are of niggling issues (typically about 6-9 months after occupancy, they lose interest- be an early bird!)
I think all your questions and fears are valid and quite natural: see you can have a friend or family member to sit and walk you through all the finer points. I was lucky to have such people around when I was in that position.
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Old 20th January 2011, 18:42   #51
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Default Re: To buy a flat or to stay on rent??

Friend - D2L - I am also in a similar situation like you. After going through the posts, I am even more confused. There is almost equal pull, if not exactly, from either perspective. As in my case, I am not from Bangalore, Can't say whether I will be in Bangalore for the rest of my life, but the peer pressure is there.

Both sides have their own pros and cons, while ownership is more emotional than financial, as somebody rightly said. To my understanding, RE prices would see another revision effective April -> implies if I have to go, I have to go now.

PS - We are 2 parties looking for buying apartments. If like minded parties are there, we can bargain with the builder for a group discount. Please PM if interested.
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Old 20th January 2011, 19:03   #52
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Default Re: To buy a flat or to stay on rent??

Quote:
Originally Posted by DigitalDragon View Post
Friend - D2L - I am also in a similar situation like you. After going through the posts, I am even more confused. There is almost equal pull, if not exactly, from either perspective. As in my case, I am not from Bangalore, Can't say whether I will be in Bangalore for the rest of my life, but the peer pressure is there.

Both sides have their own pros and cons, while ownership is more emotional than financial, as somebody rightly said. To my understanding, RE prices would see another revision effective April -> implies if I have to go, I have to go now.

PS - We are 2 parties looking for buying apartments. If like minded parties are there, we can bargain with the builder for a group discount. Please PM if interested.
group discounts may work in some cases dependent on current demand.
Even if you are not from that city, I would always recommend buying a property, as it would not depreciate (not drastically at least). You can always rent it out if you will return to the city. I remember getting offers for 10L on Sarjapur road when I lived in Bangalore. Now that I think of it, 10L as a home loan seems very small. I could have afforded to have a flat there, perhaps on rent
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Old 6th April 2012, 18:20   #53
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Default Home Loan Vs Rented House. The quitessential debate.

This a question, that I m sure, lingers on inside many of us, and has always been a very important decision of our lives.
Some of us have made it, others haven't yet.
I belong to the second set.
The set of people who have not, yet, taken the biggest loan for most of us middle class folks, THE HOME LOAN, and I m thoroughly confused whether it is worth taking it at all. Let me elaborate it a bit.

I work at Bangalore and got married last year. I m 30 years old. My parents passed away and I m their only issue. I do not have any inheritance whatsoever.
At the moment, me and my wife stay at a rented house at Basaweshwaranagar, which is locality we simply love. I pay INR 10,000.00 as monthly rent for a 2BHK house.

I have Hariya (My Scorpio CRDe) and Don(My Bullet Electra) as my means of transport.
I m the sole wage earner for both of us, currently.

Now, if I were to purchase a house of the size we live in, at the area we live in, it would cost me more than a crore, which simply, to me, doesn't make sense. In fact, even apartments at Basaweshwaranagar do not cost less than 85 lac INR.

While Basaweshwaranagar was just an example, I m sure this is how it is across the metros in India. So, here comes the question:

Even if my landlord/s triple/s the rent over the next 10 years, it would still be way less than my EMI I d pay to buy a property in the same area however, the feeling of having one's own house, at least when one retires is what is pulling me to it. But is it worth it?

Is taking a Home Loan and repaying it for 15 years a sensible investment today?

The options that come to my mind are:

1. Do Not take a Home Loan, invest in retirement savings plans, etc.
2. Take a Home Loan for a well developed area, it makes financial sense in the long run.
3. Take a Home Loan, but not for a well developed, inflated area.
4. None of the above, there are other ways of safe guarding your future.

I think it is an interesting and of course, a never ending debate but since we have quite a few financial gurus on TBHP, their inputs could help all of us newbies in making our lives secure in the long run.

I would request all poll respondents to write their reason for choosing a particular option in this poll.

Let the numbers roll.
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Old 6th April 2012, 19:24   #54
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Default Re: Home Loan Vs Rented House. The quitessential debate.

Property investments are rarely enjoyed by the generation that builds / acquires the property. They are usually enjoyed by the next gen (s).

If you and your wife plan kids, then invest somewhere like Whitefield, go and live there and enjoy your later years. Even otherwise, thats a good modern suburb which one can live in, into the long term. Some day when reverse mortgages mature in India, you can probably cash out and buzz off on a world tour with the money!

Its a proven fact that in the urban situation all over the world, the suburbs are the ones which experience a massive influx of people, while older areas get more and more saturated and commercialized. Even Bangalore is a Live example of this fact.

So invest in a nice modern suburb, go and live there and watch your property appreciate over the years. 30 is a good age to start!

Thing is, one can easily afford to live on rent in a highly upscale place, but trying to buy there is very difficult indeed - this holds good for most people.
Cheers
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Old 6th April 2012, 19:31   #55
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Default Re: Home Loan Vs Rented House. The quitessential debate.

The best option currently for you would be to wait for some more time and then go for it. I say this being under the impression that you do not currently possess a substantial amount since you mentioned about 'no inheritence.' Surely, the decision which you are contemplating is a very important one and warrants due consideration before you decide on anything.

Having had the experience of building a house without taking a home loan, I can tell you that do not go for huge loans running into 20ish years because you cannot foresee the future and cannot be certain that your earnings are not going to diminish over a period of time (20 years is a very long period - lives can change). Of course, the pleasure of owning a house surpasses all the hardship that we go through.

1. Do not go for any sort of loans without a strong backing.
2. Do not commit for an EMI of more than 10% of your monthly income.
3. Be patient and try to build up a strong base for you to take calculated risk of taking a loan.
4. Invest in sectors which will for sure fetch you a certain amount after a stipulated period of time, unlike mutual funds.
4. Allow your money to grow to a point where at least you have 70% of the amount required to purchase/construct a house.

And, when you are confident that you can take it on, give it everything you have - this could entail disposing off some of the most valued possessions - and try to fill the void. After all, owning a house in Bangalore is not easy for us - the middle class group. Even after all the above measures you require more money, go for a calculated risk by opting for a loan.

Hope this helps in some way. All the best !!
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Old 6th April 2012, 20:32   #56
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Default Re: Home Loan Vs Rented House. The quitessential debate.

There is no reason you have to own a home in the area you love. You can rent where you live and purchase where you can afford. Always look at a 10-15 years time frame. If you can purchase 2 properties, go for that instead.

my 2c worth!
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Old 6th April 2012, 20:38   #57
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Default Re: Home Loan Vs Rented House. The quitessential debate.

Did not choose any of the options listed above as none of them makes sense. Here is why.

Most of us treat buying a home as an investment, actually its isn't, Robert Kiyosaki of Rich Dad Poor Dad talks about investments that generate income. Today a apartment does not generate income (Will explain shortly), on the other hand land is an investment, as it does not involve any recurring or maintenance cost.

An apartment today in a decent locality costs north of 70L and in most probability generates rent of ~25K. Now to recover 70L with this kind of rent would take ~23 years (and we have not yet included maintenance cost). This is far-far on the higher side. Usually if its somewhere around 15years it would be considered good buy. All this means the cost of property have gone too much north too fast.

That being said everyone needs to buy a house and it should be predominantly for getting a roof over your head rather than investment. If this is for an investment then look for areas where in the cost of property is lower with a 8-10 years horizon.

Another thing to keep in mind the times of making quick money by only paying some token amount in booking property are far gone, i remember folks who made quiet a decent sum of money doing just that.
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Old 6th April 2012, 21:09   #58
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Default Re: Home Loan Vs Rented House. The quitessential debate.

Buying a house in a place like Bangalore makes a lot of sense as the property appreciates quite well.
You mentioned about the EMI always being higher than the rent even if it triples. But you are also getting an asset in your name. So, a part of the EMI also goes towards building this asset. No it is not a apple to apple comparison.

Now, i am not sure if you have investigated tax benifits too. If you have a loan of say 60L, and assuming majority of the EMI is interest for the first few years, you may be saving nearly 30% of the EMI - very substantial.

So its all about how much EMI you can afford to pay...

I also selected "buy house in suburbs where it is not yet expensive" as i believe this is a good way to get appreciation, at an age where being next to every possible convinience is not really that important.
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Old 6th April 2012, 22:08   #59
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Default Re: Home Loan Vs Rented House. The quitessential debate.

You could have bought a site not so far away from where you live a few years ago. Whether to construct a home or not, you could have waited.

Cost of construction remains same everywhere, its the cost of the site that depends on the area. I had bought sites in RR Nagar 6 years ago and has given me the flexibility of waiting to construct the house at a time I find convenient (although costs go up 5% every year:( )

So, buy a site. Its a must now for a better future. Concept of suburb is non-existent. Whats a suburb today is the city tomorrow.
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Old 6th April 2012, 22:11   #60
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Default Re: Home Loan Vs Rented House. The quitessential debate.

If you're trying to buy a retirement house, I'd recommend buying it in a town from where you belong, unless you see yourself living in the crowded polluted city of Bangalore (or any other large metro) after retirement having to push yourself through the crowds and drive yourself in the traffic.

Not only will that be much less expensive, you'd also be getting far more bang (read land area) for your buck and you could also be renting out the place for the next 30 years. At the end of 30 years you could choose to knock down and build a shiny new house for all that you saved in these years and live happily ever after.

Also consider the fact that when apartments age they no longer seem that great a purchase to new buyers. A 30 year old apartment (at your retirement age) is not an investment, and would barely even be a roof over your head considering all the abuse and leakages it would face in all those years.
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