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.
What should be your income to buy a luxury property in India?
Posted on 17 Mar 2024
Author: Sayan Sircar
Tags: 
House Purchase
9 mins read
House Purchase
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This article shows the minimum income needed to buy a luxury property in India.
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:
-
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.
-
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.
📚 Topics covered:
- Introduction
- How to calculate the funding source for buying a house?
- How much do banks lend for a home loan?
- Putting all of this together
- How does then a joint income help us to buy a bigger house?
Introduction
This is the third part in the series of buying luxury real estate. The first part, which talks about buying a luxury property as a first house, is here: How to buy luxury property in India from salary income?.
In this article, we will calculate how much monthly income you need to buy a ₹2 crore luxury property. Please note that the price tag of a luxury property is city-specific.
How to calculate the funding source for buying a house?
A house is generally funded by a mix of own funds and 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. A good thumb rule for calculating the EMI of a home loan is ₹1,000/lakh borrowed or ₹1 lakh/crore borrowed at 9% for 15 years. You can see more such examples here: How much EMI do I have to pay for my home loan?
Now that we know the EMI for the loan, we need to understand how much banks will lend for buying a house.
How much do banks lend for a home loan?
A bank will only lend a up to a percentage of the home’s market (registration) value. For example, if the registration value is ₹1 crore, typically a bank like SBI will lend ₹75 lakhs only. This percentage of loan amount to registration value is called loan to value (LTV)
Loan to Value = Loan amount / Registration value
We have covered the concept of LTV and calculation of home loan vs. salary in detail here: Home Loan Eligibility for Joint Applicants: how to buy a bigger house
Ultimately, your minimum monthly income will be given by this formula:
Minimum monthly income = EMI / maximum percentage allowed
where maximum percentage allowed is typically 30-40% which is how much of the in-hand salary goes to paying the EMI of the house.
To understand how to plan for purchasing a luxury property:
Putting all of this together
Here are some sensitivities showing the minimum annual income (in lakhs) needed vs. down-payment and how much EMI you pay as a percentage of take-home income.
Down-payment from 15% to 20%
| Maximum EMI% | 15% | 16% | 17% | 18% | 19% | 20% |
|---|---|---|---|---|---|---|
| 27% | 76.6 | 75.7 | 74.8 | 73.9 | 73.0 | 72.1 |
| 28% | 73.9 | 73.0 | 72.2 | 71.3 | 70.4 | 69.5 |
| 29% | 71.3 | 70.5 | 69.7 | 68.8 | 68.0 | 67.2 |
| 30% | 69.0 | 68.2 | 67.3 | 66.5 | 65.7 | 64.9 |
| 31% | 66.7 | 66.0 | 65.2 | 64.4 | 63.6 | 62.8 |
| 32% | 64.7 | 63.9 | 63.1 | 62.4 | 61.6 | 60.9 |
| 33% | 62.7 | 62.0 | 61.2 | 60.5 | 59.7 | 59.0 |
As the table shows, if you make a 20% down-payment and the bank allows a maximum 30% EMI as a percentage of the take-home pay, then you need ₹64.9 lakhs/year income to purchase a ₹2 crore house.
Down-payment from 21% to 25%
| Maximum EMI% | 21% | 22% | 23% | 24% | 25% |
|---|---|---|---|---|---|
| 27% | 71.2 | 70.3 | 69.4 | 68.5 | 67.6 |
| 28% | 68.7 | 67.8 | 66.9 | 66.1 | 65.2 |
| 29% | 66.3 | 65.5 | 64.6 | 63.8 | 63.0 |
| 30% | 64.1 | 63.3 | 62.5 | 61.7 | 60.9 |
| 31% | 62.0 | 61.2 | 60.5 | 59.7 | 58.9 |
| 32% | 60.1 | 59.3 | 58.6 | 57.8 | 57.1 |
| 33% | 58.3 | 57.5 | 56.8 | 56.1 | 55.3 |
As the table shows, if you make a 25% down-payment and the bank allows a maximum 30% EMI as a percentage of the take-home pay, then you need ₹60.9 lakhs/year income to purchase a ₹2 crore house.
Down-payment from 26% to 30%
| Maximum EMI% | 26% | 27% | 28% | 29% | 30% |
|---|---|---|---|---|---|
| 27% | 66.7 | 65.8 | 64.9 | 64.0 | 63.1 |
| 28% | 64.3 | 63.5 | 62.6 | 61.7 | 60.9 |
| 29% | 62.1 | 61.3 | 60.4 | 59.6 | 58.8 |
| 30% | 60.0 | 59.2 | 58.4 | 57.6 | 56.8 |
| 31% | 58.1 | 57.3 | 56.5 | 55.8 | 55.0 |
| 32% | 56.3 | 55.5 | 54.8 | 54.0 | 53.2 |
| 33% | 54.6 | 53.8 | 53.1 | 52.4 | 51.6 |
As the table shows, if you make a 30% down-payment and the bank allows a maximum 30% EMI as a percentage of the take-home pay, then you need ₹56.8 lakhs/year income to purchase a ₹2 crore house.
How does then a joint income help us to buy a bigger house?
If you have followed the content above, the crux is that for a home financed by home loan, higher the family income, the higher loan that can be sanctioned leading to a bigger house that can be purchased. For a couple with dual income, it makes a lot of sense to:
- buy the house jointly
- borrow home loan jointly
In such a case, the multiple applied is on the couple’s combined monthly income. There are additional tax-related benefits as well which we have covered here: Home loan tax benefits that you get when you buy a property jointly with your spouse
Related Articles
- How to buy luxury property in India from salary income?
- How to buy a second house which is a luxury property?
- Home Loan Eligibility for Joint Applicants: how to buy a bigger house
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This post titled What should be your income to buy a luxury property in India? first appeared on 17 Mar 2024 at https://arthgyaan.com
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