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.
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:
This article gives you some points to think about if you are buying a second house which is a luxury property.
This article helps you figure out how to purchase real estate priced over ₹1.5 crore.
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.
A house is generally funded by a mix of own funds and home loan. We have covered this topic in more detail here:
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.
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:
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.
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.
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.
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.
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:
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
This article discusses how to plan early retirement in the face of lifestyle inflation and lack of health insurance for an investor in their 40s.
Published: 8 December 2024
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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