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Ramalingam

Ramalingam Kalirajan  |8778 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 18, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Asked by Anonymous - May 12, 2024Hindi
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Hi, I am 40 years old. Is it advisable to buy a flat worth 2cr with 80% bank loan and give it for rent. Expected rent is 60k per month. Or should I build a corpus of 2cr. For my retirement life.

Ans: At 40 years old, you have an important decision to make regarding your financial future. Let's explore the advantages of setting up a Systematic Withdrawal Plan (SWP) in mutual funds compared to buying a flat for rental income.

Setting up an SWP in Mutual Funds
Advantages:
Flexible Withdrawals:

With an SWP, you have the flexibility to withdraw a fixed amount at regular intervals, providing a steady stream of income to support your financial needs, including retirement planning.
Diversification Benefits:

Mutual funds offer diversification across various asset classes, reducing concentration risk and potentially enhancing long-term returns compared to investing solely in real estate.
Professional Management:

Mutual funds are managed by professional fund managers who actively monitor and adjust the portfolio based on market conditions, aiming to optimize returns while managing risk.
Tax Efficiency:

SWP withdrawals from mutual funds may enjoy tax benefits, especially if held for the long term, with certain equity funds qualifying for capital gains tax exemption after a holding period of one year.
Buying a Flat for Rental Income
Advantages:
Stable Rental Income:

Renting out a flat can provide a stable source of income, which may be attractive for covering ongoing expenses or supplementing other sources of income.
Tangible Asset:

Owning real estate provides tangible asset ownership, offering potential capital appreciation over time and serving as a hedge against inflation.
Portfolio Diversification:

Real estate investments add diversification to your overall portfolio, reducing risk by spreading investments across different asset classes.
Disadvantages:
Liquidity Constraints:

Real estate investments are relatively illiquid, making it challenging to access funds quickly if needed, especially during emergencies or market downturns.
High Initial Investment:

Buying a flat requires a significant upfront investment, typically financed through a substantial bank loan, which may strain your finances and limit investment diversification.
Maintenance Costs:

As a landlord, you'll be responsible for ongoing maintenance, repairs, and other associated costs, which can erode rental income and impact overall returns.
Conclusion
Given the advantages of SWP in mutual funds, such as flexibility, diversification, professional management, and potential tax benefits, it may be a more suitable option for generating regular income and building a retirement corpus. However, it's essential to assess your risk tolerance, investment goals, and financial situation carefully before making a decision. Consider consulting with a Certified Financial Planner to develop a personalized financial plan aligned with your objectives and aspirations.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |8778 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 17, 2024

Asked by Anonymous - May 08, 2024Hindi
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I'm 32 unmarried and earn 4 lakhs per month post tax. My current MF portfolio is 90lakhs. With 20- 25% IRR and pay 50k for rent and 25k for expenses. want to know if should buy a flat worth 2 CR buy doing 50% down payment or should continue paying rent and invest n MF? If I continue with MF investment then when should be right period or financial situation to buy flat worth 2cr in future. PS: I don't see owning an home as an emotional attachnment.
Ans: Evaluating the Decision to Buy a Flat vs. Continue Investing in Mutual Funds
Understanding Your Financial Situation
As a 32-year-old earning 4 lakhs per month post-tax with a substantial MF portfolio of 90 lakhs, you're in a strong financial position. With disciplined spending, paying 50k for rent and 25k for expenses reflects prudent financial management.

Assessing the Rent vs. Buy Dilemma
Considering your high income and investment prowess, the decision to buy a flat worth 2 crores with a 50% down payment warrants careful consideration. Evaluating the financial implications of home ownership versus continued MF investing is essential.

Analyzing Financial Impact
Purchasing a 2 crore flat with a 50% down payment entails significant capital outlay and ties up funds that could otherwise be invested in MFs. Assess the opportunity cost of this decision, factoring in potential returns from MF investments versus home ownership.

Evaluating Long-Term Goals
Given your aversion to emotional attachment to homeownership, prioritize your long-term financial goals and investment objectives. Determine if the potential benefits of home ownership, such as asset diversification and stability, outweigh the opportunity cost of foregone investment returns.

Timing Considerations
Consider the timing of your decision to buy a flat in relation to your financial situation and market conditions. Monitor real estate trends, interest rates, and your MF portfolio performance to identify opportune moments for property acquisition.

Seeking Professional Advice
Consulting with a Certified Financial Planner (CFP) can provide valuable insights and personalized recommendations tailored to your financial objectives. A CFP can help you weigh the pros and cons of buying a flat versus continuing MF investments and devise a strategic plan aligned with your goals.

Conclusion
The decision to buy a flat or continue investing in MFs depends on various factors, including your financial goals, risk tolerance, and market conditions. By carefully evaluating the financial implications and seeking professional guidance, you can make an informed decision that aligns with your long-term financial objectives.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8778 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 06, 2025

Money
Hi Mam, I need your prompt advice as i need to take decision on the same. I am 55 years and have 5-6 Years in retirement. Post retirement have planning and secure. Now coming to the point that i am staying a capital of state where i pay house rent Rs.40000/- PM. My take homme monthly salary is approx 6 Lacs. My organization have policy to pay 50% interest subsidy on interest of Housing loan. I am planning to purchase a flat value 1.25 Cr in which 80 Lacs Banks are ready to give for next 12 Years . monthly EMI will be 85-90 K and out of which approx 28K will be subsidy and 40K my rent and 5K saving of IT in Housing loan interest . Ideally it will cost to me approx. 15-20 K Per month additionally . After retirement i will sell the flat and square off my balance home loan. Please suggest is it worth of taking ....or i should continue to pay House rent and add 20 K liability in Mutual Fund contribution . Urgent reply please
Ans: You are evaluating whether to buy a flat worth Rs. 1.25 crore or continue renting. Let us assess this situation considering financial, practical, and retirement planning aspects.

 

Financial Considerations
1. Monthly Cost Comparison

Current rent is Rs. 40,000 per month.
EMI for the home loan is Rs. 85,000-90,000 per month.
Subsidy from your organisation reduces the EMI cost by Rs. 28,000.
Tax savings on housing loan interest further reduce the cost by Rs. 5,000.
Net additional cost to you is Rs. 15,000-20,000 per month.
 

2. Opportunity Cost of Down Payment

Buying the flat requires Rs. 45 lakh as a down payment (including registration).
Investing this amount in mutual funds for 5-6 years can yield higher returns.
Evaluate if your current mutual fund contributions can bridge this gap later.
 

3. Post-Retirement Loan Liability

Your home loan tenure is 12 years.
After retirement, loan repayments will depend on other income sources.
Selling the flat to clear the loan may not always fetch expected value.
 

4. Rent vs. Ownership Costs

Owning a flat involves maintenance, property tax, and repair costs.
Consider if these costs are affordable post-retirement.
Renting offers flexibility and avoids these additional expenses.
 

Lifestyle and Practical Aspects
1. Stability vs. Flexibility

Owning a flat provides stability and security of residence.
Renting offers flexibility to relocate post-retirement if needed.
 

2. Emotional Value of Owning a Home

Buying a home can give emotional satisfaction and a sense of achievement.
Ensure this decision aligns with your long-term financial health.
 

3. Rental Yield Analysis

Flats often have low rental yields compared to their cost.
You may not earn substantial rental income after clearing the loan.
 

Retirement Planning
1. Impact on Retirement Corpus

Redirecting Rs. 20,000 to mutual funds can grow significantly over 6 years.
This additional corpus can support your post-retirement lifestyle.
 

2. Liquidity Needs Post-Retirement

Flats are illiquid assets and may take time to sell when needed.
Liquid investments ensure easy access to funds during emergencies.
 

3. Alternate Strategies

Continuing to rent and investing in mutual funds may create better retirement wealth.
Combine equity and debt funds for an optimal mix of growth and stability.
 

Tax and Subsidy Considerations
1. Housing Loan Subsidy

The 50% interest subsidy reduces your effective EMI significantly.
This benefit reduces the immediate cost of buying the flat.
 

2. Tax Savings on Interest

Tax benefits under Section 24 further reduce the financial burden.
These savings must be factored into your overall cost analysis.
 

Final Insights
Buying a flat offers stability but increases financial obligations. Continuing to rent allows flexibility and creates additional retirement wealth. Evaluate the long-term implications on your retirement corpus before deciding. Align this decision with your financial goals and retirement needs. Engage with a Certified Financial Planner to create a detailed retirement plan and optimise your investments.

 

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Ramalingam

Ramalingam Kalirajan  |8778 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Dec 16, 2024

Money
Hi Sir, I need your prompt advice as i need to take decision on the same. I am 55 years and have 5-6 Years in retirement. Post retirement have planning and secure. Now coming to the point that i am staying a capital of state where i pay house rent Rs.40000/- PM. My take homme monthly salary is approx 6 Lacs. My organization have policy to pay 50% interest subsidy on interest of Housing loan. I am planning to purchase a flat value 1.25 Cr in which 80 Lacs Banks are ready to give for next 12 Years . monthly EMI will be 85-90 K and out of which approx 28K will be subsidy and 40K my rent and 5K saving of IT in Housing loan interest . Ideally it will cost to me approx. 15-20 K Per month additionally . After retirement i will sell the flat and square off my balance home loan. Please suggest is it worth of taking ....or i should continue to pay House rent and add 20 K liability in Mutual Fund contribution & avoid Interst subsidy !! Urgent reply please
Ans: Key Financial Factors to Consider
Option 1: Buying the Flat
EMI Costs

EMI: Rs. 85,000-90,000 monthly for 12 years.
Net EMI Cost (Post subsidy and tax saving): Rs. 15,000-20,000 per month.
Rental Saving

Buying eliminates rent, saving Rs. 40,000 monthly.
Subsidy Benefit

50% interest subsidy reduces your EMI burden by Rs. 28,000 per month.
Tax Benefits on Home Loan

You save approximately Rs. 5,000 monthly in taxes on interest payments.
Plan to Sell Post-Retirement

Selling the flat in 5-6 years may or may not yield significant appreciation.
Real estate liquidity can be unpredictable.
Option 2: Continuing to Rent
Current Costs

Rent: Rs. 40,000 per month.
No additional EMI burden.
Investment Opportunity

Allocate Rs. 20,000 monthly (saved from net EMI cost) to mutual funds.
This investment grows significantly in 5-6 years.
Flexibility

Renting offers flexibility in case of post-retirement relocation.
Detailed Analysis
Buying the Flat: Pros and Cons
Pros:

Owning a home offers emotional satisfaction.
Subsidy and tax savings reduce EMI burden.
Rent savings (Rs. 40,000) offsets the EMI.
Cons:

Requires additional Rs. 15,000-20,000 monthly for EMIs.
Real estate appreciation is uncertain over 5-6 years.
Selling post-retirement involves transaction costs and market risks.
Renting and Investing: Pros and Cons
Pros:

Avoids the hassle of a large loan and associated liabilities.
Rs. 20,000 invested in equity mutual funds can grow significantly.
More flexibility to relocate post-retirement.
Cons:

Rent payments continue with no ownership asset.
Miss out on interest subsidy and home loan tax benefits.
Scenario Comparison
Option 1: Buying the Flat
Total Outflow: Rs. 15,000-20,000 monthly (EMI after adjustments).
Asset Created: A flat worth Rs. 1.25 crore, potentially appreciating in value.
Risk: Real estate value may stagnate or decline in the short term.
Option 2: Renting and Investing
Total Outflow: Rs. 40,000 monthly in rent, plus Rs. 20,000 invested in mutual funds.
Investment Growth: Assuming 10% CAGR, Rs. 20,000 per month grows to Rs. 16 lakh in 5 years.
Risk: Market volatility may impact mutual fund returns.
Certified Financial Planner’s Suggestion
Based on your financial profile and goals, here is a balanced recommendation:

Leaning Towards Renting and Investing

Renting gives flexibility and avoids real estate risks.
Invest the additional Rs. 20,000 in equity mutual funds for better returns.
A diversified portfolio may provide more liquidity and growth by retirement.
If Emotional Value of Ownership Matters

Buy the flat only if you are confident about the real estate market in your city.
Ensure the flat is easily sellable in 5-6 years.
Carefully assess the costs and expected returns before committing.
Final Insights
Buying a flat works best if real estate appreciation outpaces mutual fund growth. However, this is uncertain in a short horizon. Renting and investing in mutual funds is a more flexible and potentially rewarding option for retirement planning.

Take a prudent decision considering your priorities and risk tolerance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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Asked by Anonymous - Jun 03, 2025Hindi
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I have given 2 attempts in neet but unfortunately couldn't clear it...I have completed my graduation from local degree college. Now I'm thinking of doing my post graduation from lucknow university with masters in public health. Is it a good idea?
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Why couldn't you succeed? The reason may be that you completed your undergraduate degree simultaneously. If you had planned properly, you would have been able to pass the NEET exam. Unfortunately, that didn't happen.

NO. Once again, you seem to be making a mistake. Why did you choose Public Health? Do you understand its scope? If you don't, then why are you pursuing it?

Let me remind you that anyone can appear for NEET after completing a BSc. Here are the requirements.
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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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