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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
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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?

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 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.

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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

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