How to buy luxury property in India from salary income?
This article helps you figure out how to purchase real estate priced over ₹1.5 crore.
How to buy luxury property in India from salary income?
Posted on 21 Feb 2024
Author: Sayan Sircar
Tags: 
House Purchase
10 mins read
House Purchase
📢Join 3400+ readers on WhatsApp and get new post notifications!
This article helps you figure out how to purchase real estate priced over ₹1.5 crore.
This article is a part of our detailed article series on the concept of buying luxury properties. Ensure you have read the other parts here:
-
What should be your income to buy a luxury property in India?
This article shows the minimum income needed to buy a luxury property in India.
-
How to buy a second house which is a luxury property?
This article gives you some points to think about if you are buying a second house which is a luxury property.
📚 Topics covered:
- What is a luxury property?
- Which builders should you choose for your new house?
- Where to get money to buy a house?
- Option 1: Ready-to-move house
- Option 2: Under-construction house
- Expenses of a luxury property
What is a luxury property?
Luxury Homes Priced Rs 4 Cr & Above Saw More than 75% MORE Sales Last Year In Top 7 Cities: CBRE
This and others similar to it were in the headlines on 14th Feb, 2024 in many newspapers. The question that arises is: What makes a house (villa or apartment) a luxury property? A luxury property:
- is expensive, generally over ₹1.5 crore or above, generally inside a gated community or housing complex
- has amenities like a clubhouse with gym and pool, multi-tier security, play/walk / recreation areas and nowadays even restaurants
The price tag of ₹1.5 crore is a general guideline, as you will seen in news articles, since if you go to say Mumbai, you cannot buy much at that price.
Which builders should you choose for your new house?
We need to check for these things for the builder who is offering the property:
- Reputation in the market for timely deliveries
- Active RERA registration for the respective state
- No active court cases or disputes regarding the promoters or executives
- The builder should preferably be listed on the stock exchange to promote complete transparency on financials
Such properties will be predictably more expensive than those without all these checks being true.
Where to get money to buy a house?
You can buy a house via a mix of your own funds and a home loan. We have covered this topic in more detail here:
- how to know if you can afford the house vs. your other goals: Goal-based investing: how to purchase your dream home
- how to fund the house purchase: Should you sell your mutual funds to buy a house?
If the house has a loan component, then the maximum value of the house is capped by the amount of loan the bank will sanction. In this article, we will consider a house that costs ₹1.6 crore, for easy calculation, and look at various ways of buying it.
We will now cover the case where you currently stay on rent or with your parents. You are now planning to buy your first house as a luxury purchase. We will consider two cases:
Option 1: Ready-to-move house
You have to pay the entire amount at one go for a ready-to-move house. A bank will give you no more than 75-80% as a home loan. This calculation means you need to pay at least 20-25% to the seller from your pocket. So, you need to arrange for 25% of ₹1.6 crore, which is ₹40 lakhs today.
There are many ways of getting to this ₹40 lakhs:
- you have already been saving for the down payment for some time and mostly have the money saved: SMART goals: investing step-by-step for buying your dream home
- you have some money from selling another property: How Section 54EC helps you save tax when you sell property
- you have shares and mutual funds that you can sell. You don’t have to pay long-term capital gains tax if you use that money to buy a house: Sec 54F: a hack that can save lakhs in taxes when you buy a house
- you can borrow from friends or family or take a personal/gold loan: EMI Calculator: know your EMI per lakh to easily know how much total EMI you have to pay
For the remaining ₹1.2 crore, you have to take a home loan. If you take a 15-year loan at 9% interest, you will pay ₹1.2 lakhs/month as EMI (as per this article)
There will be tax benefits as well on both principal and interest that we recap here:
Home loan tax benefits are of two types depending on the construction status of the house.
If the house is ready to move, then
- under Section 80C, up to ₹1.5 lakhs can be claimed for the principal paid on the loan. This deduction will be reversed if the property is sold within 5 year of registration
- under Section 24B, up to ₹2 lakhs can be claimed as a deduction.
- under Section 80C, stamp duty can also be claimed, in the year of registration, up to the ₹1.5 lakhs limit of 80C
If the house is under-construction, then
- Section 80C deductions on principal and stamp duty, will be applicable in the financial year when registration happens
- Section 24B deduction has the same rule. However, the interest paid on a home loan until 31-March of the financial year preceding the year of registration may be claimed in 5 equal instalments once registration happens. In any case, the limit of ₹2 lakhs for Section 24B applies.
- If the house is rented out, there is no limit on the deduction allowed under Section 24B
- Tax deductions are applicable only if the construction completes within five years of taking the home loan
None of these deductions are applicable in the new tax regime. Section 24B is available in new tax regime only if the property is let out and not self occupied.
As a home owners should always check first if you will save more tax in the new tax regime in this case: Which is the best tax regime to choose from April?
Option 2: Under-construction house
An under-construction house allows you to space out the payments over multiple years. This is a good thing since
- the price of the house does not increase after you book
- you don’t need a home loan immediately if you have enough cash in the beginning which saves you interest
- if you don’t have any savings or just a small amount, you can still buy if you can pay around 1% of the house price per month for the next 8-10 years
To understand how to plan such a house purchase:
The last case is interesting. If you have 10 lakhs of cash with you for paying the booking amount, then a ₹1.6 crore luxury under-construction apartment can be yours if you can spend ₹1.6 lakhs a month like this:
We have covered this case in detail here: How to Buy Your Dream Home Without Any Savings: A Step-by-Step Guide
Of course, here also you are paying ₹40 lakhs out of your pocket and the rest ₹1.2 crores comes from home loan. It is just that you can manage to pay the down-payment over time as well as get the benefit of lower EMI in the moratorium period.
If you change your mind at any point regarding this purchase, you can always calculate your returns and exit if needed: How to correctly calculate returns from an under construction flat?
Expenses of a luxury property
Buying a luxury property requires two things that you must take care of going forward:
Large loan EMI
Here you need to plan very carefully regarding the home loan you are taking:
- longer the loan duration, higher the interest, lower the EMI
- shorter the loan duration, lower the interest, higher the EMI
You should always take the highest possible loan in terms of duration to get the maximum flexibility in payment terms and least upfront interest cost. You always have the option of prepaying as per your convenience as salaries increase. Nowadays most banks offer home loans without prepayment charges.
High maintenance charges
Apart from EMI of the home loan, your monthly expenses will have to include maintenance costs which is always on the high side (rate per square foot) for luxury properties. Paying maintenance supports the infrastructure of the luxury property (like clubhouse, security, building maintenance) and supports the price of the property.
Maintenance rates of ₹4/sq ft or higher is typical and should be added to the monthly budget.
Related Articles
- How to buy a second house which is a luxury property?
- What should be your income to buy a luxury property in India?
- How to Buy Your Dream Home Without Any Savings: A Step-by-Step Guide
What's next? You can join the Arthgyaan WhatsApp community
You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.For resident Indians 🇮🇳:
For NRIs 🇺🇸🇬🇧🇪🇺🇦🇺🇦🇪🇸🇬:
Share on WhatsApp: To understand how this article can help you:
If you have a comment or question about this article
The following button will open a form with the link of this page populated for context:If you liked this article, please leave us a rating
The following button will take you to Trustpilot:Discover an article from the archives
Previous and next articles:
Latest articles:
Market Movements
Portfolio Review
Mutual Funds
Which mutual funds have fallen the least in this market correction? Should you switch?
This article shows you which funds have not fallen the most now that the stock market has corrected by 10-15% from life-time highs.
Published: 20 November 2024
4 MIN READ
Topics you will like:
Next steps:
1. Email me with any questions.
2. Use our goal-based investing template to prepare a financial plan for yourself.Don't forget to share this article on WhatsApp or Twitter or post this to Facebook.
Discuss this post with us via Facebook or get regular bite-sized updates on Twitter.
More posts...Disclaimer: Content on this site is for educational purpose only and is not financial advice. Nothing on this site should be construed as an offer or recommendation to buy/sell any financial product or service. Please consult a registered investment advisor before making any investments.
This post titled How to buy luxury property in India from salary income? first appeared on 21 Feb 2024 at https://arthgyaan.com
We are currently at 494 posts and growing fast. Search this site: Copyright © 2021-2024 Arthgyaan.com. All rights reserved.