Expensive Education, Good Job, Marriage Expenses and finally a flat of your own. The struggle goes on. The city suddenly has become expensive and so is the residential flat. Like old days again a dream house has become out of reach of most of the people. Here is a good formula of solving the problem.
Property as an Investment
Everyone do plan for future and save in financial instruments such as LIC, ULIP, PPF, Mutual Funds, Fixed deposits etc for future. The idea is very simple. Look at property as an investment and calculate the returns as compared to all instruments. One will be surprised to see property returns surpass most of other instruments. FD &PPF gives 8%, Insurance 6-7 % and MF about 12-15%. Now let us look what property offers. Looking at long term property has easily given you 8% compounding annually and also you save/ receive approx 5% towards rent. That makes it 13%. So the property investment is not only safe but also one of the best investment. Even if one has a small amount of saving it is advisable to take a home loan as it will help you save additional taxes towards repayment of Interest.
What to do
For those in Jobs, Home loan is easily available from Financial Institutions. The idea is to take a maximum loan at the rate of 8-9 % and buy a residential property of choice. In long run property easily fetch you a return of over 8 %. Even If you rent out the same it will easily fetch you a rent of approximately 5%. Renting out the place has 2 major advantages. First is that the 30 % of the income received is exempted under the repair and maintainence expenses, property tax gets waived and the second BIG advantage is that all the interest paid towards the Home Loan is exempted and will drastically bring down your cost of borrowing by 30%( There is no limit to exemption in case of Let out Property-i.e. LOP). Moreover as the investment is very low i.e. only 15-20% of the entire value this will also give you the advantage of Leveraging.
So if you thought buying property is expensive, think again.