ks,
There is good reason for the 40% thumbrule which should be the limit in terms of debt servicing (or paying off EMIs).
You are lucky that, in the last so many years, there was no serious medical emergencies and other expensive costs loaded onto you. Besides, you will also note that your entire wealth would be skewed towards RE which is not as liquid as you would want to be when needed - example, if you had 10 lakhs in FDs and wanted to get 5 lakhs somehow within 2 weeks, it would well-nigh be impossible with RE to do that, while with FDs it would be easy.
Therefore, while we all live in hope that we will live till 100 with no major illnesses or other sudden emergencies, the 60% free cash is for your monthly expenses, saving (which most of us do very poorly) and other emergency reasons.
Another point I'd like to make is that you will notice that a vast majority of us have no real savings to talk about, except that it has been built up thru RE. But that comes back to the point I was making. Most of us in this world do not really save money. We play the high-leverage game thru RE and hope that we can build wealth for the next 7 generations. This gamble is also perpetrated by the Govt which creates sops for this kind of - after all, if you can call Stocks in good companies which make good products selling for a decent profit a gamble, isn't land also that? Since in most cases, only a few areas you park your money in grows and other areas don't grow. Besides there are other issues like litigation, fraud, etc which make land/flats quite a gamble at the best of times. And if you bought land
at reasonable prices you will make a good asset over the long term. But there are so many who have bought from 2006 onwards, fo whom property would not even equate to FD kind of returns over the next 10-15 years if you include the interest costs. So, RE is not the bed of roses that its made out to be by the banks, realtors and Govts, besides the lucky few who made it!!!
And I have not even looked at inability to pay thru income loss or job loss in the 20-year loan tenure!!!
All in all, RE is also a minefield in which 99% of us play with highly leveraged (loan is 9 times equity) debt financing. Therefore the message some of us "
Bears" are trying to pass on, that
RE is only good as an asset builder when bought at reasonable prices and
not any price that the builder, banker and broker/speculator would like you buy should be looked at from this angle!!!
These are the reasons we are cautioned by the experts/experienced to not get carried away and keep the debt servicing to manageable levels (40% is just a general level, you can plug any value there so long as you keep a level head on your shoulder when doing so!).
cheers