Anil Sachidanand gets a real kick when one of his clients invites him to a house-warming ceremony. As Managing Director and CEO of Aspire Home Finance, he advises that you buy a home early as it gives you the buffer to look at other investments.

What are the issues faced by first-time home buyers?
Buying a home is an emotional decision and it involves the entire family. For a person buying a home for the first time, housing is not an investment - it is a need and a social status. By and large, affordability is the key concern of the individual, particularly in the low and mid income segments. Supply is also weak for homes priced under Z30 lakh.

How can a home buyer handle the affordability issue? 
In my opinion, instead of purchasing a house from a developer, buying a plot and building a home could reduce costs. You can take a composite loan to buy a plot and do the construction.

What are the financial management aspects to consider when buying a home? 
Home buyers tend to stretch themselves financially by taking loans from family and friends, availing of personal loans, and on credit cards. You must balance the requirements with your ability to make repayments of all the loans. It is advisable not to over-leverage because the excitement of the new home would soon give may to financial stress.

Should one be locked into an EMI early in the career or invest the savings in equity? 
There is no doubt that housing should take precedence over equity investments. In a growing real estate market such as in India, you must buy early and sit tight. Buying early in your career also gives you advantages, such as exploring the purchase of a second home or a vacation home and planning for retirement homes.

In the past, house purchases were done later in life. But the average age of those who take home loans is around 28 years currently I feel that investing in real estate during one's early career brings in a strong sense of financial planning.

What is the role of property in one's investment portfolio? 
Investments in real estate in India over a period have given more you "peace of mind" as the equity in the house has improved.

This comes from the fact that the loan availed of starts to look smaller. Unlike in the past, real estate is becoming a more liquid asset and hence, I would suggest building a strong real estate portfolio.

What share of your personal portfolio is in real estate? 
Real estate investments accounts for around 60 per cent of my portfolio. Of the rest, 20 per cent is in equities and the balance in FDs and SIPs.

I bought my first two-bedroom house in Mumbai's western suburb about 12 years ago, when I was 34 years old, by taking a housing loan.

I retained this house and bought another three-bedroom house two years ago in the western suburbs. I currently service both EMIs.

How does one evaluate whether they should prepay their home or invest their savings elsewhere? 
I would advise that you should retain your first home loan rather than pay it off.

This is because the EMIs would have been paid for many years, so your interest portion reduces.

As your savings level grows, you can consider investing in a second home after evaluating rental and price appreciation returns on the property.

If you are able to generate enough cash flows, then you should invest in safe instruments after taking the advice of financial consultants.

What are the tradeoffs to consider when refinancing an existing home loan? 
If you are refinancing your loan within two years, you must consider the amount of processing fees and other charges incurred. But if the loan is older, evaluate the interest payment carefully to be sure that you are saving by switching.

This is because in the new loan, the share of interest will be higher. In many cases, refinancing may only be beneficial if the new provider is offering interest rates which are 200 bps lower.


by Meera Siva for The Hindu Business Line