Confused between buying a house or investing first? Discover a smarter approach to homeownership in India. Learn how mutual fund investments can outperform home loan costs and help you buy debt-free.
Let’s delve into the financials of acquiring a 2BHK apartment in a metropolitan area like Gurugram, priced at ₹1 crore.
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Down Payment: Typically, a 20% down payment is required, amounting to ₹20 lakh.
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Loan Details: Borrowing the remaining ₹80 lakh at an interest rate of 7% per annum for a 20-year tenure results in:
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Monthly EMI: Approximately ₹62,000.
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Total Repayment to Bank: Over the loan term, you’d repay around ₹1.48 crore, which includes both principal and interest.
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Additional costs to consider:
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Stamp Duty & Registration: In Haryana, this is approximately 7.5% of the property’s value, equating to ₹7.5 lakh.
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Total Immediate Outflow: Combining the down payment and stamp duty, the upfront cost is ₹27.5 lakh.
📈 Alternative Investment Strategy: Mutual Funds
Instead of committing to a home loan, consider investing the ₹27.5 lakh (down payment plus stamp duty) into mutual funds. Assuming an average annual return of 12%, your investment could grow as follows:
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Initial Investment: ₹27.5 lakh.
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Estimated Value in 10 Years: Approximately ₹85.41 lakh.
Additionally, if you opt to rent a property at ₹22,000 per month and invest the remaining ₹40,000 monthly:
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Monthly SIP Investment: ₹40,000.
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Estimated Value in 10 Years: Approximately ₹92.2 lakh.
Total Corpus After 10 Years: Combining both investments, you’d accumulate around ₹1.77 crore.
🏡 Property Appreciation vs. Investment Growth
Over the same 10-year period, assuming an annual property appreciation rate of 5%, the ₹1 crore property would appreciate to approximately ₹1.62 crore. This means your investments have outpaced the property’s value increase.
💡 Conclusion: Building Wealth Before Buying
Given the potential returns from investments and the financial strain of home loans, it may be prudent to delay purchasing a property until you’ve built a substantial corpus. Even if you accumulate 70-80% of the required amount, you can consider purchasing a home without the burden of a significant loan. This approach not only reduces financial strain but also alleviates the mental stress associated with debt.
❓FAQs:
1. Is it better to buy a house or invest in mutual funds in 2025?
It depends on your financial goals. For many, investing in mutual funds can yield higher returns and provide flexibility, while delaying home purchase until enough corpus is built.
2. What are the hidden costs when buying a house in India?
Apart from the down payment, you must account for stamp duty, registration charges, maintenance, and property tax. These can add up to 7–10% of the property value.
3. How much home loan can I get with a ₹20 lakh down payment?
Most banks offer loans up to 80% of the property value, so with ₹20 lakh, you can generally afford a property worth ₹1 crore.
4. What is the average return on mutual funds in India?
Equity mutual funds in India have historically returned around 10–12% annually, depending on market performance and fund selection.
5. Will property prices in India rise significantly in the next 10 years?
Property prices have shown modest growth, averaging 4–6% annually in most metro cities. Returns may be slower compared to equities.
