i have started earning since 1997 without going for a house but started saving from 1999. at the present condition, is my decision wise by not opting for a house/flat and going for saving in post office schemes, ppf,nsc etc? If i gained how much and if i lost something, how much i lost?
RE:home loans
by JM on Apr 14, 2007 11:02 PM Permalink
It is not a good decision nicegem. You have saved money and you think you are rich but considering inflation and considering you will NEED a house at some point, it is not the right decision.
As Jagadeeshan rightly said, go for a flat but dont stretch your budget. It is better to buy 2 small flats as your first buy rather than buy one big one now. This will give you flexibility which you need as a first-time home buyer.
Stop thinking about being rich and saving money (like our fathers and grandfathers did) and start thinking about being wealthy. Since you are just 10 years into your career, Im assuming you are in your early 30s and still have about 10 years to take calculated financial risks. You have your 40s when you can be get conservative and diversify your portfolio to NSC etc.
RE:home loans
by Jagadeesan R on Apr 14, 2007 09:09 PM Permalink
No you should still go for a flat. Just limit your budget according to your earnings. If needed, go for a 7/8 year old flat. Your EMI should not be more than 30% of your net monthly income...Also your plan should be pay off the loan in 6/7 years, by making some periodic bulk pre-payments etc...even if the initial term is 15 year or 20 years...This way, you can maximize your savings on income tax and also ensure that you dont fall into debt trap. Future interest rates are likely to be maximum 11-12 percent ( we are almost at that point now )...
Flat being an investment, is a need in the long-term...If you make some sacrifices now, you can build an asset for the future,..
Post Office, NSC tax exemptions will slowly be phased out over 4/5 years..Also now way we can continue to get good interest rates on these..
RE:does the RBI have a choice...
by wolverine on Apr 14, 2007 06:50 PM Permalink
Amjad, the only option right now would be to sell off your property if you got it financed thru a floating rate loan.Property prices are still high and you will get a good price for it.Then you can hang on for a year or so when property prices will have cooled down due to the high rates and then make a purchase.You might actually end up with a profit if you handle it wisely.
RE:does the RBI have a choice...
by Murali Thoota on Apr 14, 2007 07:33 PM Permalink
RBI is not supposed to maintain its fiscal discipline based on people's investments. RBI is chartered with monetary policy based on the macro environmental activity. Who raised the real estate prices? Why? I do not have answers. The huge % growth in GDP that we clocked in the past few years is partially responsible due to real estate prices. The real growth in economy is little, and the hype related to it is more. People are responsible for this irrational behavior on the real-estate, that lead to this huge inflation which RBI is now trying to control. I support the acts, or RBI.......that was the only way to control the uncontrollable Indian hype...
RE:does the RBI have a choice...
by Rohit on Apr 15, 2007 04:11 AM Permalink
An appreciation in real estate value HAS NO AFFECT ON GDP. The definition of GDP is all final goods and services produced in a given economy in a given time period.
Therefore the 8.5%/yr REAL GDP GROWTH is very much real. Avg real per capita income has increased > 30% in the last 4 years. This has fueled the increase in demand for real estate, hence the price appreciation.
RE:does the RBI have a choice...
by Rohit on Apr 16, 2007 08:32 AM Permalink
This Murali fellow seems to have a rudimentary grasp of Basic Economics.
Recent rapid growth of GDP has caused upward pressure on prices. Raising Interest rates makes it more difficult to borrow to buy cars, houses, etc. Therefore Demand is restrained and the economy slows down. This lowers inflationary pressures.
Moreover by strongly raising interest rates the RBI has demonstrated that it is willing to make un-popular moves. Since people now know that the RBI is willing to quash inflation at all cost they will no longer expect inflation. If no one expect inflations then shop keepers will not raise prices and workers will not demand higher wages. When there are no inflationary expectations there is no inflation. Tis called 'Rational Expectations.'
RE:does the RBI have a choice...
by Amjad Khan on Jun 10, 2008 08:16 PM Permalink
yr grasp of economics looks furthermore rudimentary, so instead of making conjectures, come up with something concrete ...the GDP has been growing for quite sometime now... the inflation has been gorwing much faster ... all of a sudden, I agree with the 2nd part though - looks okay...
RE:does the RBI have a choice...
by JM on Apr 14, 2007 11:05 PM Permalink
Excellent post Murali!!!! I wanted to write on similar lines but you have already said most of what I wanted to write.
Is it a fixed rate home loan is really fixed & will not change thru out the tenure.How much % of loan amount can be prepaid without paying any penalty interest?
RE:fixed home loan
by misenkiser on Apr 14, 2007 05:17 PM Permalink
Most of the fixed home loans are reset after every 3 years or so . The pre-payment penalty varies from bank to bank but in most of the cases it is 25%
