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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
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:

📚 Topics covered:

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:

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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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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