How to plan from first year of Job to buy a Home at 30-35 years age
The younger generation today is restless and raring to go. Owning a car or a house tops their wish-list as soon as they start drawing their salary.
Buying a house requires big investment, and it is unlikely in the next 10-15 years you would be able build a corpus big enough for buying a house in cash. Instead the focus should be to save an amount sufficient for the down payment of the house, rest can be financed by a bank loan.
Make an estimate, set your goals
To own a dream house in the next 10 years, you must take all factors into consideration. These include the amount you need to invest and the appreciation in property rates. The property that costs Rs 50 lakh today may come at Rs 1.30 crore after 10 years at 10% rate of appreciation of property price. If you want to pay at least 25% of the total amount as down payment, you need to save around 33 lakh in next 10 years.
| Rate of appreciation | Cost after 10 years | Down payment (25%) |
| 8% | 107.95 | 26.99 |
| 10% | 129.69 | 32.42 |
| 12% | 155.29 | 38.82 |
| 15% | 202.28 | 50.57 |
Remember, you have to pay for cost of registration of the property as well from your own pocket. This can be 7-8% of the total property price. Going ahead with the above example, you may need another Rs 10 lakh. Therefore, the total corpus you should be looking at is around Rs 45 lakh in next 10 years.
How to build the corpus
After having an idea of the amount you need, the next step is to decide where and how much money you need to invest. At 10% rate of return, you need to invest Rs 22,000 every month to create a corpus of Rs 45,000. At 12%, monthly investment amount comes down to Rs 19,500.
| Rate of return | SIP amount |
| 8% | ₹ 24,434.52 |
| 10% | ₹ 21,786.28 |
| 12% | ₹ 19,368.24 |
| 15% | ₹ 16,148.87 |
Investment options
Clearly, you need an investment in options which can generate 12-15% returns in the next 10 years. Such returns are possible only through equity exposure.
Mutual funds SIP: Go for monthly systematic investment plans (SIPs) in mutual funds. Choose two-three equity funds—large-cap and multi-cap funds. SIP reduces the volatility risk of equity markets. Since you invest a fix amount every month for a long period, you capture each market cycle without the need of timing the market.
You should opt for ECS mode in which the investment will be made automatically as the amount will be debited from your bank account. While selecting funds, apart from the track record of the fund, you should also look for schemes of those fund houses which are known for good fund management practices.
Direct equities: Stocks have the potential to yield highest returns. If you are young and open to taking risks, this can be a good option. Make sure that you buy good stocks. To be at the safer side, buy stocks in the Nifty or BSE 100 induces. These are stocks most well-traded in market. Make sure you diversify your portfolio well.
A penny saved is a penny earned
Maximize your savings for bigger investments. You must keep a tab on small expenditures, be it shopping, eating out, recreation or splurging on luxury items.
