If you’re planning to invest in real estate this financial year, make sure your EMI doesn’t exceed 30–35% of your monthly take-home income.
Sumit and Sharmili, a Mumbai-based couple in their 30s, are planning to buy a house before starting a family. However, before making the decision, they need to get their finances in order.
Buying a home is perhaps the biggest financial decision of one’s life. Since it involves a significant financial commitment, making an informed decision is crucial. Here are five things you need to keep in mind if you are planning to buy a house.
Buying a house is an emotional decision, but it should be driven by financial clarity—not peer pressure.
This is especially important as property prices in metros have remained high. According to a report by CREDAI-Colliers-Liases Foras, average housing prices across the top eight markets in India saw a 10% year-on-year rise during the quarter ending December 31, 2024. Moreover, a Reuters poll of housing experts indicates that India's average home prices are set to outpace consumer inflation this year.
"Buyers must consider their financial stability, including job security and income stability, as well as their debt-to-income ratios," says Kanika Gupta Shori, founder and COO of Square Yards, a real estate marketplace.
Remember that buying a house is a long-term financial commitment, and you need to be on solid financial ground.
"Ensure the EMI does not exceed 30–35% of your monthly take-home income. Home ownership should be a comfort—not a financial burden. Don't just focus on EMI affordability; factor in property tax, maintenance, registration costs, and GST implications, which often add 15-20% beyond the listed price (for under-construction properties)," says Col Sanjeev Govila (retd), Certified Financial Planner and CEO of Hum Fauji Initiatives.
Additionally, consider the cost of interior decorations, which could be 10-25% of the house's price. A financially wise approach is to take 5X annual income as a home cost limit, contribute 20% as a down payment from your own savings, and ensure that your EMI remains within 30% of your net monthly income.
Look for areas with upcoming infrastructure projects such as metro lines, highways, schools, and business zones that can drive capital appreciation.
It is essential to choose RERA-registered properties and reputed builders. Opting for ready-to-move-in or near-possession properties can reduce uncertainty and rent duplication, even if they come at a slightly higher price.
"Don’t buy a house just for Section 80C or 24(b) tax breaks. These are sweeteners, not reasons to overcommit. In fact, you may not even be able to avail them due to changes in tax regimes," warns Govila.
Analyse how RBI's monetary policy could impact home loan rates in FY26.
"With potential rate cuts on the horizon, timing your purchase strategically could save lakhs over the loan tenure," says Govila. Locking into a reasonable fixed or floating rate is crucial. Longer loan tenures can reduce EMI burdens but increase the total interest paid.
However, if your finances are in place and you have found a good property, waiting for a further decline in interest rates may not be the best decision. Over the entire loan tenure, you will experience several interest rate cycles. Nonetheless, a falling interest rate scenario can be an excellent time to buy a house.
Investing in real estate is a significant decision that requires financial prudence, strategic planning, and a clear understanding of market dynamics. By ensuring financial clarity, balancing affordability with aspirations, selecting the right location, and keeping an eye on interest rates, you can make a well-informed and secure investment. Make sure your dream home remains a source of comfort rather than financial stress.
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