What did you think about to buy a house? And yet, when you open property sites, that same size of house is way beyond your budget. So where is the mistake? Are you spending too much? Is your salary too low? First of all, you're not doing anything wrong, and your salary isn't low. It's just one thing no one ever told you - there is a last age to buy a house. After which, that same house becomes a risk for you. And today, we're going to solve this. What is the last safe age to buy a house as per your salary, and how expensive a house should you actually buy? Buying a house in your 20s, 30s, 40s, or 50s could be the biggest mistake of your life. Or it could be the best decision of your life, depending on four factors that I am going to share with you.
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| What Is The Correct Age To Buy A House In India |
Factor 1: Investment Decision
Which is where the majority of people get it wrong and make a mistake. They look at buying their house as an investment decision, which is absolutely wrong. Let me show you this chart.
In this chart, what we are showing you is the House Price Index, which is published quarterly by the RBI. You can clearly see here, in the brown line, it is showing you the year-on-year increase or decrease of house prices across India. What you will see here is that in 2013, for example, house prices were appreciating roughly by 25%. While from 2017 onwards, house prices have not been growing even at a rate of two or three percent. It will not make sense for you to go and buy a house. You will have to time it perfectly, and you will have to look at other investment areas. Think about it: create a complicated Excel spreadsheet, think about maintenance, think about income tax savings. You will make a decision purely based on investment.
Also Read, How to Invest in Your 20s. Complete Step By Step.
Factor 2: City Decision
Decide which city you want to settle in. You must not make that decision all by yourself. You make that decision along with your life partner, because ultimately you want to have a happy life. Just imagine you have a flat in Gurgaon, for example, and you get married to somebody and they love Bangalore, right? They are not ready to settle in Gurgaon. You have this push and pull all the time in your married life. That one decision you made prior to marriage is going to create a lot of strain in your married life. Also, please remember, when you get married, give yourself a few years where you both are evaluating multiple options from a lifestyle perspective and from career options as well. You’ve got to have that stability in your married life. You’ve got to understand which city, which locality is going to give you the best career options. So, let us say that you get married at 28, and after five or six years of living together, you both understand what is the right city for both of you. Go and make that decision. By the way, I just picked up 28 as a random age for marriage. In fact, please let me know in the comments what you think is the right age for marriage, and I'll pick a few of the best answers and give them my LinkedIn growth course absolutely free.
Factor 3: House Size
Decide the size of your house. I'm not asking you to go and think about how many square feet you need in the house, but please make sure that you are very clear whether you need a two-bedroom, three-bedroom, four, or five-bedroom house, depending on your requirements. Because if you go and buy a house which is too small, what you will end up doing is you will end up selling it off and incurring a lot of charges and buying a new house, and you're going to create a lot of havoc for yourself. At the same time, if you go and buy a house which is too big for you, you will end up financially burdening yourself and creating a lot of financial strain. So please decide the size of the house. You might think about it this way: you might need a two, three, or four-bedroom depending on how many kids you are likely to have, how many kids you're planning to have, whether you want your parents living with you or not, depending on your personal circumstances. So please make that decision jointly with your life partner and understand whether a three-bedroom house or a four-bedroom house is the best for you.
Also Read, How Much Money Should You Have At The Age Of 25, 30, 35 and 40 In India?
Factor 4: Affordability
Your affordability must decide the locality in the city that you want to settle in. For example, if you want to settle in Delhi, you can't just blindly go and say, "I want to live in Vasant Vihar." Or, for that matter, if you want to settle in Bangalore, you can't just say that you want to settle in Jayanagar only, because the locality within the city will depend on the affordability that you have. For example, both of you earn one lakh rupees as take-home right now. Please put 40% of that take-home aside for something called a Home Fund or your House Fund, right? So in this example, 40% of one lakh rupees is 40,000 rupees. Keep it aside, you are not touching that. Now, think about a ten-year horizon after your wedding, basically, and look at investing this money for a ten-year period. Look at different financial products out there which can give you a good, decent return or maximum return for a period of 10 years. Now, let us assume that you are able to get 12% returns year-on-year. After 10 years, this money that you've invested every month in SIP, or whichever way you want to do it, you are likely to get 92 lakh rupees with this calculation. After 10 years, so if you get married at 28 and both of you start to set up this house fund and every month you are putting 40,000 into it, and at the end of the 10th year your cumulative yearly growth rate has been 12%, you are going to have 92 lakh rupees at the age of 38 years. And this will free you up absolutely. You are not paying EMIs from day one from the time you got married. You have now selected your city. Now you have got 92 lakh rupees of funds available for you to make a decision about locality.
Now there are a few options in front of you. The ideal option is to buy a flat or a house that you can outright buy with this 92 lakh rupees right now. That is the best decision. But if you decide to take a home loan, that's absolutely fine, because after 10 years house prices will also go up and with 92 lakh rupees you might not get the size that you want, right? So you might want to consider taking a home loan. That is absolutely fine. As a thumb rule, I will never buy a house which is costing me two times more than my current affordability. So let us say after 38 years of age I have 92 lakh rupees in my pocket, I am going to buy a flat which is not costing more than one crore 84 lakh rupees. So that means that I can pay 50% as a down payment and 50% I can take as a home loan.
Also Read, 3 Money Management Tips. Best Personal Finance Strategies.
Now coming back to what is the perfect age to buy your first house: according to me, buying a house in your 20s is a mistake. According to me, if you get married in your late 20s, you should consider buying your first house in your late 30s. Of course, there are a number of other parameters that might come in your way, but what happens is, if you buy your house in your late 30s, you have accumulated a sufficient amount of funds, you have made some long-term life choices for yourself, you have shaped your career the way you wanted it to be, and that will give you a lot of peace and happiness for the remaining 40 to 50 years that you might live in that house.
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