Hi, I am close to 49 years, earning about 3.5L per month after tax. I have a house worth 2Cr, two sites roughly worth 1Cr, EPF worth 1Cr and MF/Shares portfolio worth around 1Cr (50K SIP) and other smaller LIC policies I also have personal loan of about 10L pending and car loan outstanding of 10L both costing me 80K eMI for next two years more. I want to buy an apartment which is approximately at 2.5Cr to have a bigger living space for my family. Please suggest if it is doable or should i plan something else

Ans: At 49, you're earning a solid Rs. 3.5 lakhs per month after tax. Your assets include a house worth Rs. 2 crores, two sites worth Rs. 1 crore, an EPF worth Rs. 1 crore, and a mutual funds and shares portfolio worth Rs. 1 crore. Additionally, you have smaller LIC policies.

You also have outstanding personal and car loans totaling Rs. 20 lakhs, with EMIs costing you Rs. 80,000 per month for the next two years. You're considering purchasing a new apartment worth Rs. 2.5 crores to provide a larger living space for your family. Let’s evaluate this decision comprehensively.

Analyzing Your Current Assets and Liabilities
Assets:
Primary Residence: Rs. 2 crores
Two Sites: Rs. 1 crore
EPF: Rs. 1 crore
Mutual Funds and Shares: Rs. 1 crore
Liabilities:
Personal Loan: Rs. 10 lakhs
Car Loan: Rs. 10 lakhs
Monthly Financial Commitments
Income:
Monthly Salary: Rs. 3.5 lakhs
Expenses:
EMIs: Rs. 80,000 for the next two years
Living Expenses: Let’s estimate Rs. 1.5 lakhs
Savings and Investments: Rs. 50,000 in SIPs
After accounting for EMIs and living expenses, you have approximately Rs. 1.2 lakhs left each month. This provides a buffer for additional investments or savings, but the bulk of your income is committed.

Feasibility of Purchasing the New Apartment
Financial Cushion:
To purchase the Rs. 2.5 crore apartment, you need to evaluate your financing options. Your current assets and savings can potentially support this purchase, but it requires a well-thought-out approach.

Loan Considerations:
Given your current EMI commitments, taking on additional loans for the new apartment will significantly impact your monthly cash flow. Here are some steps to consider:

Clear Existing Loans: Focus on repaying your Rs. 20 lakhs in personal and car loans over the next two years. This will free up Rs. 80,000 per month, which can then be allocated towards a home loan for the new apartment.

Home Loan for New Apartment: After clearing existing loans, you could consider taking a home loan for the apartment. With the current financial landscape, securing a loan for Rs. 1.5 to Rs. 2 crores may be feasible, given your income and assets.

Using Savings and Investments: Part of the purchase can be financed through your savings and investments. Your mutual funds and shares worth Rs. 1 crore can be partially liquidated. However, ensure you retain a diversified portfolio for long-term growth.

Detailed Financial Planning
Review and Rebalance Portfolio:
Given your significant assets in mutual funds and shares, it’s essential to periodically review and rebalance your portfolio. This ensures optimal growth and mitigates risks. Consider consulting a Certified Financial Planner to tailor a strategy that aligns with your new financial goals.

Emergency Fund:
Maintain an emergency fund to cover at least six months of living expenses. This fund acts as a safety net, ensuring that unforeseen circumstances do not derail your financial plans.

Prioritize Investments Over LIC Policies:
If you hold traditional LIC policies, review their performance and returns. Often, these policies offer lower returns compared to mutual funds. It might be wise to surrender underperforming policies and redirect those funds into higher-yielding investments like mutual funds.

Managing Lifestyle Inflation:
As your income grows, so do your expenses. It’s crucial to manage lifestyle inflation and ensure that your spending does not outpace your income growth. Stick to a budget and track your expenses to maintain financial discipline.

Real Estate as a Living Space, Not an Investment
It’s commendable that you wish to purchase a larger apartment for your family. However, remember that real estate should primarily be viewed as a living space rather than an investment. The returns on real estate investments can be unpredictable and illiquid.

Strategic Steps Forward
Step 1: Clear Existing Debts
Prioritize repaying your personal and car loans over the next two years. This will reduce your financial burden and improve your creditworthiness for future loans.

Step 2: Secure a Home Loan
Once your current loans are cleared, approach banks or financial institutions for a home loan. Given your income and asset base, securing a loan for Rs. 1.5 to Rs. 2 crores should be achievable. Compare loan offers to find the best interest rates and terms.

Step 3: Partial Liquidation of Investments
Consider partially liquidating your mutual funds and shares to fund the down payment for the apartment. Ensure you retain a balanced portfolio for continued growth.

Step 4: Maintain Diversification
Diversify your investments across asset classes to minimize risks and maximize returns. Regularly review and rebalance your portfolio to align with your financial goals.

Step 5: Consult a Certified Financial Planner
Engage a Certified Financial Planner to create a comprehensive financial plan. They can provide tailored advice and strategies to achieve your financial goals while ensuring your family’s financial security.

Final Insights
Purchasing a new apartment for Rs. 2.5 crores is a significant financial decision. By carefully evaluating your current financial situation and strategically planning your finances, you can make this goal achievable. Clearing existing debts, securing a home loan, and maintaining a diversified investment portfolio are crucial steps. Engaging a Certified Financial Planner will provide expert guidance to navigate this journey successfully.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in