stinaikar

It actually still works. Using your own numbers, at 11%, your EMI is approx. 50,000 assuming a 20-year 50 lakh loan. You have an income of 1 lakh per month. In 5 years, your income will be 1.6 lakhs assuming an annual increment of 10%. But your EMI is still 50,000 after 5 years! Any increment of salary that is greater than 0% is good for you.

BlotJab

However it is not optimized way in terms of economics (or in simple words, it is not optimized way of investing money). Yes, it is profitable, as salary increment is more than inflation and EMI is constant. But one can invest money in better way if there is no EMI and salary is getting increased every year. You can justify affordability of higher EMIs (or higher RE prices) just by showing that your affordability will increase in future when salary will be more and inflation will be less.

suryawork

Job argument against home loan is because in contrast with other loans home loan tenure is quite big , 15-20 and now probably 25-30 years . Earlier people had govt. or stable jobs which is not the case now .
Wonder what world are u living in ? Most people I know have had to increase their tenure and some of them their EMIs in the last couple of years . Try convincing the bank that you can pay EMIs even after retirement ! EMIs stay stable only if the interest rates remain constant .
By the way , forget abt regular raise - companies will retain ppl only till they are productive and job loss may force them to accept a lower package .

stinaikar

You are confusing the economics of an investment decision with something that is a part of life in today's times. Obviously you cannot expect the same level of job security with what your father might have had in 1960's. Job instability affects EVERYTHING. Not just home loans. If you lose your job, then worst case - you sell your property and live with your parents because you wont even be able to even rent an apartment. Don't blame job instability as an excuse for not taking a home loan because that is going to exist for the next 2000 years! Once you bring in job instability as an excuse, then it NEVER the right time to take a home loan. So then there is no point in even a debate. We all have to work within the constraints of life. Its like saying - we should not marry because divorce rates have doubled in the last 10 years or we should not drive a car because car accident rates have increased.

As far as interest rates are concerned. They go up and down and follow a cyclical path. What this means is that over a period of time, there will be times when you will have to stretch your budgets (like the people you know) but then there will also be times when they have more money left over due to lower interest rates. It all evens out over a period of time. Also people should not assume that teaser rates for the first 2-3 years continue forever. If they are stupid enough to make that assumption, then they shouldn't be investing any money in anything!

stinaikar

I agree with this view. You have the option to invest your money elsewhere whenever a good opportunity arises, when you don't have to pay a high EMI. With a RE investment, you are locked onto a relatively illiquid asset for a long period of time.

But seriously what are the realistic investment opportunities other than RE? Stocks and FD's? Stocks are probably even more unpredictable that RE. And FD rates do not go above a certain level, no matter how high the interest rate environment is.

sunnyketkar

You are taking it wrong stinaikar.
Secure job here does not mean that we can not earn at all. A Home EMI would be the biggest cut from anyone's salary. One should have security of job to pay such heavy EMI per month.
If one didn't have such a big EMI commitment then that money could be invested in safe instruments and in the bad time it can generate such an income wherein one can fulfill basic necessities like food, clothing etc.

Secure job argument against only buying a home, is totally fair! For a common man, what other biggest investment he does in his life than buying a home ?

can you explain it now

stinaikar

Give me one middle class person in today's world who has job security. Should no one buy a house then? Should investment bankers, IT folks who face a lot of job insecurity never buy a house? Should they never send their kids to good expensive schools? If you have bad times, you still have the option to sell your real estate, pay off the loan and move into a rented house, don't you? You may even make some nice money off it that may be better than the FD option. Sure it might take you a few months to do it, but there is always some solution if things go bad. Its not like you are locked onto an EMI forever. Exit options exist.

My broader point: Life is uncertain in many ways and we have no way to resolve that uncertainty especially in matters of job security, death, disability or marriage. In the absence of complete information about the future, the optimal solution should be one which simply looks at whether your investment will grow.

msp1976

20 years back, you could not get a home loan in most of the cases. You would live in a rented place for most of your life...Accumulated money and when you retired, you would build a home and live the rest of your days. If you cannot accumulate money for building home, you died in a rented place.

Today, you can get a home loan. Yes.. it tends to be the biggest expense for 15-20 years. However you get to enjoy your property at a younger age and hopefully the home lasts until you die. The possibility that you would die under own roof is higher now !!

So which scenario would you prefer ?

I prefer the scenario that today's system offer !!!

shashankgujjar

people who work for BMC in mumbai and PMC in Pune have job security , all you have to do is turn up for work , if you do you do under the table business or if you dont then there is just has to wait for some other day

erabhijeet

Hi All,

I am seeing a lot of prospective buyer here in this forum and i think we should leverage Group buying section and help each other in buying property.

I would suggest let's make 3-4 buckets where groups can fit, like -

1. Wakad 2 BHK 40 -45 L
2. PCMC 2 BHk 40-42 L

etc....

and if we get a subtantial number of intrested people in a group, lets meet F2F once or twice to decide strategy and then work out the rest.

I know it will a little tedious to manage 10-15 people communication together but if we follow few rules which enterprise follows for execution of their projects, we might save a good deal of money.

Let's try to make it a consumer driven deal.........what say guys !!!