Anjan Sengupta and his wife currently live in a rented apartment with their 6-year-old daughter. The area is growing with quite a few upcoming residential complexes and Anjan’s wife is particularly keen to buy a flat nearby as her parental home is quite close. Their daughter’s school is also conveniently in the same locality.
Anjan is an IT engineer while his wife, Sucharita, works in an insurance company. Everything was going fine till the pandemic hit them when Sucharita had to accept a pay cut. Although Anjan is highly skilled and doesn’t foresee any job loss yet he thinks that caution must not be thrown to the winds.
They must go ahead with the plan to buy a flat but at the same time make some smart moves to protect themselves from any financial crisis.
Let’s look at the steps they are taking which you can adopt too.
Augment Your Cash Reserve
Even in the normal situation, anyone should have adequate cash reserves to tide over any financial crisis. Most financial advisors suggest expenses equal to the salary of 8 to 10 months should be maintained as liquid cash.
In an unusual circumstance such as this, the corpus of such an emergency fund should be further enhanced as there can be an unforeseen large cash requirement.
Your Credit Score should be Spotless
It is extremely important to maintain a good credit score even in a crisis as a poor credit score can reflect very badly on any borrower, and any future borrowing can be problematic.
Therefore, your credit card bills and any loan EMI must be paid on time. If you have taken the advantage of moratorium offered by the banks and financial institutions, you must pay them as they are due for payment. A high credit score can help the borrower to get a good deal in a home loan and even at a reduced interest rate.
Buy Your Flat in an Affordable Location
Properties in highly developed, posh locations, and city centres are often expensive, in comparison to upcoming and affordable locations. Of course, while buying a home in an upcoming location, you need to ensure the availability of good social and physical infrastructure and amenities around the project.
You can consider buying you’re a flat in a lesser budget and save some amount if you carefully research different locations and different projects in a little more detail. Always opt for a professional property advisor who has already done the due diligence to benefit you.
By buying a flat in affordable locations you can often take advantage of superior return on investment as properties in these locations can appreciate very well with the rise in infrastructural facilities.
Opt for a Gated Community with No Fancy Amenities
Buying a flat in a complex with fancy amenities that you may not use is generally costlier and requires a larger down payment, as well as higher maintenance costs. By downsizing your requirement a bit, you can easily reduce the loan EMI. It is always easier to borrow a smaller amount than a bigger loan. After all, you can make do with a ground-level swimming pool and a swimming pool on the roof is not exactly a basic necessity, right?
Unnecessary amenities not only increase the property’s price but also increase the regular maintenance cost. In the future, when you have the requirement and enhanced income, you may plan to buy a bigger home.
There are a large number of ‘value for money’ residential projects are being built now. Choosing one of those will help you conserve substantial cash.
Choose a Longer-Term Home Loan
If you take a home loan over a longer-term, especially if you are young, it will help you to conserve cash by reducing your EMI. However, you will pay a higher interest component over the loan tenure.
It is better to plan partial pre-payment of home loans from time to time, maybe every few years. This will substantially reduce the interest outgo and you will be better prepared to face any financial crisis.
It is possible to reduce the home loan tenure in the future when the fear of financial crisis subsides.
It is always beneficial to buy a property at the bottom of the interest rate cycle, as it is right now. Moreover, attractive incentives offered by the developers, easy payment plans, EMI holidays are being offered now. These will help to substantially conserve cash along with PMAY CLSS Scheme.
There is hardly a better time than now to buy properties and conserve a good amount of cash.
