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Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 30, 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 - Jul 17, 2025Hindi

Hi, i can save 1 lakh per month. Planning to buy a house worth 1 crore in 5 years. Can pay Initial amount of 10-20 Lakhs. How should i plan my house purchase? Should i wait more to get without any financial strain? I am 30.

Ans: You are just 30. You are already saving Rs. 1 lakh every month.
You are thinking about buying a Rs. 1 crore house in 5 years.
That itself is a solid start. You have time, income, and savings discipline.

Many people wait too long. Or rush without planning. You are doing neither.
That’s excellent. Now let us shape your home buying decision carefully.

You also said you can make a Rs. 10 to 20 lakh down payment.
The rest may be home loan. You want to avoid stress.
That mindset itself deserves appreciation.

Let’s analyse your options one by one.

? Understand the real cost of buying a house

– The house is worth Rs. 1 crore. But you must pay more.
– Add 7% to 10% for registration, stamp duty, legal, and miscellaneous costs.
– Interiors, fittings, furniture can also cost Rs. 5 to 10 lakhs easily.
– If you plan to live there, think of shifting cost too.

– So, Rs. 1 crore property may require Rs. 1.15 crore in total.
– Always plan with this buffer in mind.

– If you take a home loan of Rs. 80 lakhs, EMI for 20 years at 9% interest can be around Rs. 72,000 to Rs. 75,000 monthly.
– That’s quite close to your entire monthly saving of Rs. 1 lakh.
– Which means, no room for other goals or surprises.

– If rent is saved, you may feel okay.
– But long EMIs with no savings can be risky.
– Health issues, job loss, family needs – anything can upset EMI discipline.

So better to work towards a plan where EMI is below 50% of your current monthly saving.

? Set a target down payment amount

– You are willing to pay Rs. 10–20 lakhs.
– That’s good. But increasing it will help you much more.

– Bigger the down payment, smaller the EMI.
– Smaller EMI means less pressure on lifestyle and savings.

– In next 5 years, you will save Rs. 60 lakhs if you continue Rs. 1 lakh/month.
– Even if you use only Rs. 40–45 lakhs for house purchase, it is a huge help.
– You can use Rs. 35–40 lakhs as down payment and take Rs. 60–65 lakh loan.

– That way, EMI will come down to Rs. 45,000 approx.
– You can still save Rs. 50,000 or more monthly for other goals.
– Or increase your family expenses peacefully without worry.

This approach gives you freedom, peace, and flexibility.
Avoid trying to stretch and buy house with lowest down payment.
Stretching hurts in the long run.

? Choose where to invest this Rs. 1 lakh monthly

– You have a 5-year time frame.
– So, avoid taking big risks.

– Don’t go for high-risk small cap or thematic mutual funds.
– You can’t afford a big fall in the 4th or 5th year.

– Avoid direct stocks or direct mutual funds.
– Regular plans via an MFD and a CFP give better handholding and behaviour coaching.
– Direct funds look cheap, but lack emotional management and periodic rebalancing.
– Most DIY investors take wrong actions in volatile times.
– Advisor-led investing gives better long-term experience and discipline.

– Also avoid index funds.
– Index funds do not offer downside protection.
– Active funds can manage volatility better with cash calls and stock selection.
– Index funds just mirror the market, even during big falls.
– Active funds, especially in large-and-midcap or balanced category, are better suited for medium-term needs.

– Use hybrid mutual funds or large-and-midcap funds through regular plans.
– SIPs of Rs. 1 lakh in 2 to 3 such funds is ideal.
– If Rs. 1 lakh feels too high risk, start with Rs. 80,000 SIP. Keep Rs. 20,000 in RD or debt fund.
– This also gives liquidity and confidence in case of income disruption.

– In the 4th year, start moving funds from equity to low-risk debt options gradually.
– This avoids last-year market shock.
– A Certified Financial Planner can create this glide path for you with the help of your MFD.

? Keep other goals in mind

– Don’t forget other life goals while planning for the house.
– Do you want to marry in next 2–3 years?
– Do you want to buy a car?
– Any family medical support required?
– Do you want to start a business later?

– If yes, then don’t exhaust all your savings in house.
– Keep emergency fund equal to 6 months of expenses.
– Keep Rs. 2–5 lakhs in short-term FD or liquid fund for sudden needs.
– Also plan for term insurance and health insurance properly.

– Don’t think house is the only financial goal.
– Buying a house should not stop you from wealth creation.

? Should you wait longer than 5 years?

– Depends on your personal growth and stability.
– Are you confident about job and income for next 10 years?
– Do you plan to move cities for work or marriage?
– Are you planning any career change or higher education?

– If your life stage has uncertainties, delay home purchase.
– Rent and save aggressively.
– If you stay with parents, save even more and invest smartly.

– Bigger down payment = smaller EMI = lower stress.
– That’s the golden rule.
– If waiting 1 or 2 extra years helps you reduce EMI by Rs. 10,000–15,000 monthly, it's worth it.

– But don’t wait endlessly.
– Have a year-wise action plan with target amounts and allocation.

? Home loan planning tips

– Choose a floating rate loan.
– But be ready for rate changes every few months.
– If EMI is already high, any rise in interest will pinch.
– So don’t go near your maximum EMI capacity.

– Take 20-year loan, but start with higher EMI if possible.
– Keep prepayment option open.
– Use annual bonus to make part-prepayment.

– Avoid stretching loan till retirement.
– Aim to finish loan in 10–15 years if possible.
– Don’t take top-up loans on housing unless absolutely needed.

– Don’t use home loan for buying furniture or car.
– Separate loans make budgeting difficult.

? House as a utility, not as an investment

– Your house is a utility, not an investment.
– It gives comfort, pride, security. Not regular income or high returns.
– You won’t sell your home just because price went up.
– So, don’t treat house like stock or gold.

– Don't buy in areas only for appreciation.
– Buy where you want to live for 10+ years.
– Or at least where your job and social life make sense.

– Property price grows slowly. Selling is slow and costly.
– So plan home for personal use, not for portfolio growth.

? Prepare mentally for ownership

– Ownership brings EMIs, maintenance, society fees, property tax.
– Even empty flat needs repairs and security.
– Tenants don’t come easy always. Rent doesn’t cover EMI always.

– If planning to rent out, calculate rent-to-value ratio carefully.
– Anything below 2.5–3% yield is not attractive.
– Don’t buy because peers are buying.
– Your peace matters more than social image.

– Once house is bought, don’t stop saving.
– Keep SIPs running for retirement, child education, and health corpus.

? Finally

– You are young, smart and serious about your money. That’s a winning combination.
– You already have the habit of saving Rs. 1 lakh monthly. That’s powerful.
– If you wait for 5 years, you will be in a solid position.
– You can choose a good house, pay healthy down payment, and take low EMI.
– That will give freedom and comfort in future.

– Use mutual funds with help of CFP and MFD for investment discipline.
– Avoid chasing returns or shortcuts.
– Choose stability and peace over showing off with big house and bigger loan.

– Think long-term. Don’t let a house purchase ruin your savings habit.
– Combine smart investing with realistic house buying.
– That way, you’ll build wealth and enjoy your home too.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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