Planning to buy another house, understand what will be the profit and loss

Ronit Kawale
Ronit Kawale - Senior Editor
6 Min Read


In 2021, second homes worth about Rs 10 thousand crores were purchased.
Many people have set a goal of buying a second house.
There is a lot of potential in this regard in the urban areas of India.

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New Delhi. In India, people buy a second home to meet their financial goals and personal needs. Studies have shown that the demand for holiday homes is increasing among Indians. In the year 2021, a total of 1.394 billion dollars (about 10 thousand crores) was spent on second homes. Before deciding to buy a house, it is important to keep in mind factors like location, money and laws etc.

In fact, in today's era of urbanization and increasing wealth, many people have set the goal of buying a second house. According to a study conducted by McKinsey Global Institute, there is a lot of potential in this regard in the urban areas of India, where there will be an urban population of 60 crores by 2031. Investing in a second home is an attractive opportunity, it not only helps in meeting financial goals and personal needs. Rather, this type of property diversifies your real estate portfolio and you can also generate additional income from rent. However, it is important to keep some things in mind before buying a second home.

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Why buy a second house
Atul Monga, CEO and co-founder of Basic Home Loan, says that first you should decide why you want to buy a second house? Are you going to live here on vacation or are you buying it for investment, or are you buying it for retirement or some other reason? Keeping this reason in mind, you will decide where, what type of property you want to buy and how much money you want to spend on it. According to a study by 360 Realtors, the demand for holiday homes or second homes has increased in India since the pandemic. Amidst the fast-paced lifestyle, a large number of people are investing in second homes.

where to start
Research the location keeping in mind factors like your lifestyle, property price, future rental income (if applicable), proximity to friends and accessibility. Also check on property tax, insurance cost and other rules. Only after this you decide the location and type of property.

review the financial situation
Before taking on this responsibility, ensure your financial stability, especially if you have any loan which is yet to be repaid. Before you take another loan, evaluate your loan repayment capacity. To evaluate your debt-to-income ratio, divide your total monthly payment by your total monthly income. Use a mortgage calculator to calculate how much you will have to pay each month for a second home. You have to keep in mind that the ratio of earning and loan repayment should be less than 50 percent.

Make arrangements for down payment
Now comes the matter of down payment. Here try to make maximum down payment. Make a down payment of at least 20 percent or more to reduce the loan amount and monthly payments. You can raise funds for down payment by liquidating your existing savings and assets.

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Don't forget other expenses too
Also keep in mind additional expenses like property tax, insurance, maintenance or other future expenses. See if you can easily handle the new responsibility within this budget while maintaining your current lifestyle, and this burden will not jeopardize your ability to pay. Apart from this, keep an emergency fund for any unexpected situation.

Evaluate Legal Aspects
Before you start the journey of buying a second home, it is important that you know about all the legal aspects related to it. Also check that there are no legal encumbrances with the property. Make sure that the person selling the property is its legal owner and there is no dispute going on over this property. Also obtain an encumbrance certificate to ensure that there are no legal claims or debts attached to the property. Apart from this, also check the occupancy certificate.

Know the benefits of tax also
Before buying a second home, check what tax benefits you can get. This will help in reducing your taxable income. The value of the property increases with time and it starts giving you additional income, which you can use to meet your financial goals.

Tags: Business news in hindi, Home loan EMI, Real estate, Real estate market

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