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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Sep 04, 2025

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 - Sep 03, 2025Hindi

Hi Sir, I am 43 years old, working in the IT sector along with my wife. We have a 1.5-year-old daughter. Below is our current financial profile: Income My monthly salary: ₹1.78 lakhs and My wife’s monthly salary: ₹75,000. Investments & Savings NPS: ₹4 lakhs corpus (₹50,000 annual contribution). Equity: Invested ₹28 lakhs, current value ₹20 lakhs (₹8 lakhs loss). Mutual Funds: SIPs of ₹36,000/month (₹18,000 each) current value ₹2 lakhs. PF: My PF ₹15 lakhs, wife’s PF ₹1 lakh. Assets Residential property in a non-metro city worth ~₹1.2 crore Agricultural land in my village worth ~₹1 crore (no regular income generated or 0 income from it). Loans Home Loan: ₹75 lakhs, outstanding ₹55 lakhs; EMI ₹68,000/month @ 7.6%, Principal: ~₹30,000/month, Interest: ~₹38,000/month. Car Loan: ₹9 lakhs; EMI ₹22,000/month @ 7.8%. Expenses & Savings Monthly household expenses (rent, groceries, etc.): ~₹30,000. Net savings after all commitments: ₹75,000–₹80,000/month. Upcoming Commitments Daughter’s schooling expenses will begin in ~1.5 years. My Queries I am considering selling the agricultural land (worth ~₹1 crore) and constructing a house for rental income (construction cost ~₹1 crore). The rental income I am expecting 1 lakhs/Month in the worst case. Is this a wise decision? How can I repay my home loan faster and reduce interest burden? Given the current uncertainty in the IT sector, what would be a better strategy to build long-term wealth and secure my family’s future? Kindly suggest the best course of action.

Ans: You have already created a very strong base for your family. At 43, you have good income, savings, investments, and assets. Balancing your current lifestyle and your long-term wealth is the next step. You have done well so far, and with some changes, your future will be secure.

» Current Income and Lifestyle
– Your salary of Rs 1.78 lakhs plus wife’s Rs 75,000 is strong base.
– Household expense of Rs 30,000 is very reasonable.
– This gives you higher savings rate than many families.
– Loan EMIs are heavy now, but still manageable.
– Saving Rs 75,000 to Rs 80,000 monthly after all commitments shows discipline.

» Loan Position
– You have Rs 55 lakh home loan with EMI of Rs 68,000.
– This EMI is high compared to net income.
– Principal repayment is Rs 30,000 monthly.
– Interest portion is still Rs 38,000 monthly.
– Car loan EMI of Rs 22,000 is also heavy.
– Current loans reduce your free cash flow.
– Clearing loans faster will give mental relief and save interest.

» Agricultural Land Decision
– You are thinking of selling agricultural land worth Rs 1 crore.
– You want to build house for rental income of Rs 1 lakh monthly.
– This looks attractive, but has hidden risks.
– Rental market is uncertain. Vacancy periods reduce expected rent.
– Property maintenance, tax, and repairs reduce actual returns.
– Construction delays and cost overruns are common.
– Real estate locks capital for long term with low liquidity.
– It can also reduce flexibility during emergencies.
– Rental yield rarely matches growth of financial assets.
– So, this decision may not be best for wealth creation.

» Equity Investment Status
– You invested Rs 28 lakhs in equity. Current value is Rs 20 lakhs.
– That is Rs 8 lakhs notional loss.
– Markets are cyclical. Such temporary loss is common.
– If you stay invested long term, value can recover.
– Selling in loss now will make it permanent.
– Instead, continue SIPs and stay patient.
– Actively managed funds help better in volatile markets.
– Index funds just follow market up and down.
– Active funds use strategies and expertise for better growth.
– That reduces the chance of long-term underperformance.

» Mutual Fund SIPs
– You are investing Rs 36,000 monthly in mutual funds.
– This is a very strong step.
– SIP value is still small now because investments are recent.
– Over 10-15 years, SIP compounding will be huge.
– Stay consistent even if markets go down.
– That way, cost average works in your favour.
– Investing through Certified Financial Planner ensures right funds are selected.
– Direct funds may look cheaper, but you get no guidance.
– Wrong fund choice or wrong allocation can cost more than saved expense.

» NPS and PF
– You have Rs 4 lakh corpus in NPS.
– Contribution of Rs 50,000 yearly is helpful for tax and retirement.
– NPS has equity and debt mix for long term.
– Your PF corpus of Rs 15 lakhs and wife’s Rs 1 lakh add stability.
– PF gives steady growth and retirement safety.
– These act as foundation for retirement income.

» Family Protection with Insurance
– You must check term insurance cover.
– With high loans and young child, cover must be at least 15-20 times annual income.
– If cover is less, increase it soon.
– Health insurance is also very important.
– A Rs 5-10 lakh base cover with super top-up is needed.
– This shields savings from medical inflation.

» Home Loan Strategy
– One approach is prepayment to reduce loan faster.
– If you get bonuses or increments, channel them into part-prepayment.
– Even yearly lump sum reduces principal burden.
– That lowers interest and shortens tenure.
– Focus first on closing car loan. It has shorter tenure and high EMI.
– Once car loan closes, redirect that Rs 22,000 into home loan prepayment.
– Over time, this builds huge saving in interest cost.
– This way you reduce debt stress without disturbing investments too much.

» Education Planning for Daughter
– Schooling expenses will start in 1.5 years.
– Education is a big long-term goal.
– Create a dedicated mutual fund portfolio for her education.
– Starting now with small SIP ensures smoother journey.
– Do not depend on rental income or agricultural land for this goal.
– Financial assets give more transparency and control.

» Wealth Building Strategy
– Do not divert Rs 1 crore land into construction.
– Instead, if you sell land, channel proceeds into diversified financial portfolio.
– This portfolio can include equity mutual funds, debt funds, and some safe products.
– It will give both growth and liquidity.
– Rental income is uncertain, but financial portfolio gives flexible withdrawals.
– Keep systematic approach to avoid overspending.

» Dealing with IT Sector Uncertainty
– Your worry about IT sector is valid.
– Maintain emergency fund equal to 12 months of expenses.
– Keep this in liquid funds or short-term FDs.
– Do not block all money in illiquid assets like property.
– Diversified financial assets protect you even during job loss.
– Skill upgrading and networking also reduce career risk.
– If needed, your wife’s income adds extra cushion.

» Taxation Angle
– Rental income is taxable fully under income tax slab.
– Capital gains from land sale will be taxed depending on holding period.
– Equity mutual funds have LTCG tax above Rs 1.25 lakh at 12.5%.
– STCG is taxed at 20%.
– Debt fund gains taxed at your income tax slab.
– With careful planning, you can balance tax and growth.
– Tax efficiency improves long-term compounding.

» Emotional Readiness and Lifestyle
– Owning multiple properties adds stress with tenants and repairs.
– Financial assets give simpler life.
– Retirement should not be filled with property management.
– Keep wealth structure that allows freedom and peace.

» Steps for Next 5 Years
– Do not construct house with Rs 1 crore.
– Instead, continue current SIPs and increase when income rises.
– Create emergency fund now.
– Prepay car loan first, then home loan with extra savings.
– Secure insurance for life and health.
– Create separate fund for daughter’s education.
– Review portfolio yearly with Certified Financial Planner.

» Finally
– You are in a very strong position already.
– With your income, savings, and discipline, wealth will multiply.
– Avoid locking Rs 1 crore in construction project.
– Stay invested in financial assets for growth and flexibility.
– Focus on reducing loans, increasing SIPs, and securing family protection.
– Your daughter’s future and your retirement both can be well managed.
– With smart steps now, your family will enjoy financial freedom and peace.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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

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