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Affordable Housing Finance

3 golden tips to manage your home loan burden

01 August, 2017      Home Loans


Most home buyers stretch finances to buy a flat, but this may not be a good idea, writes Manish Shah. He lists out three unique tips that may help you refine your home buying decision without exerting financial pressure on the family.


 If your monthly equated installment (EMI), is the only reason for staying back at your current job, then be rest assured you are not alone. 

Many of us get addicted to a lifestyle that can sometimes become a heavy cross to bear. 

Over the years, the average age of the first time home buyer has been dropping steadily. For the most part, this has been seen as a good sign and cheered by one and all.

However, it’s worthwhile to question if it’s always worth the price. It’s not uncommon to find cases where EMIs of home, car and personal loans are well over 50 per cent of the net household income.

Sample this:

Praveen Kumar, 35, salaried executive and father of two has had a desire of venturing out on his own for a long time now. But he finds that in the absence of a steady salary, he will find himself under water on his payments. The relevant details are:




Net Monthly Salary ( Praveen’s)

Rs. 80,000

Wife’s Net Monthly Salary

Rs. 60,000

Expenses excluding Home Loan EMI

Rs. 50,000

Home Loan EMI

Rs. 50,000

Home Loan Outstanding

Rs 50 lakhs

Current market value of the house

Rs. 75 lakhs

Monthly rent payable on the same house

Rs, 20,000



Praveen’s expenses are manageable within his wife’s salary should he choose to quit his job and pursue a new endeavour so long as he kept aside rent money for 6-12 months. Infact, if Praveen considered selling the current house and pre-paying the home loan outstanding, he could do the following:


Don’t buy, get it on rent

Live on rent in the same house at Rs. 20,000 per month

Other options can get better returns

Invest the sum left over of Rs 25 lakh (Rs 2.5 million) in tax compliant bonds (so as to avoid paying capital gains tax) @at least 6 per cent post tax returns. This will yield him Rs 1.8 lakh per annum or Rs 12,500 per month

EMI versus rent

Instead of a Rs 50,000 EMI, he will now have to pay Rs 20,000 rent and yet receive an interest amount of approximately Rs 12,500 per month

While this might be a slightly simplistic example, the point being made is that we often over extend ourselves at the cost of our potential in order to secure a home.

Given the recent market where prices of houses across several large cities in India have stagnated, someone like Praveen can take a genuine shot at an entrepreneurial venture without having unmanageable EMIs coming in the way. 

If the venture does not work out and Praveen finds himself having to go back to his old job or a similar one, he might find a similar house available at prices not too different from those today!