Investing in real estate at an early stage in life provides numerous advantages for long-term financial security, particularly, in a dynamic market like the Mumbai Metropolitan Region (MMR). Young professionals can leverage the appreciation of property values, capitalise on tax benefits, and create opportunities for future upgrades. Here’s a detailed guide on how to begin this journey, along with real-world examples, and a step-by-step guide for first-time buyers.
Why Invest Early?
Affordability: The earlier you invest, the lower the prices. Real estate prices in MMR have steadily risen by 7-10% annually over the past decade, depending on the area and infrastructure growth. Areas like Thane and Navi Mumbai have witnessed this price increase due to emerging transport corridors and infrastructure projects, making them lucrative for early investors.
Higher Loan Eligibility: Young buyers (in their 20s or early 30s) are eligible for longer loan tenures, which spreads out monthly EMIs, making it easier to finance a property purchase without straining day-to-day budgets.
Compounding Returns: The earlier you invest, the longer your property has to appreciate. In MMR, with ongoing projects like the metro expansion and coastal road, locations along these routes are expected to see significant price hikes in the coming years.
Step-wise Guide
Step 1: Evaluate Your Financial Standing – Assess your savings, ongoing expenses, and debt obligations. Ideally, you should aim to save 20-25% of your monthly income for a down payment. The down payment for a typical 1BHK in a mid-tier location like Thane or Navi Mumbai ranges between ₹15-25 lakhs.
Step 2: Research the Market – Identify areas with high growth potential. Suburban areas like Kalyan-Dombivli, and Panvel, which are seeing infrastructure boosts, are ideal for first-time homebuyers. Prices here range between Rs. 7,000- Rs. 9,000 per sq. ft., much lower than prime locations like South Mumbai, where rates can exceed Rs. 50,000 per sq. ft.
Step 3: Get Pre-approved for a Home Loan – Approach banks or financial institutions for pre-approval of a home loan. Interest rates in India currently hover around 8-9% for home loans, making it crucial to compare offers, and opt for lenders providing better repayment terms.
Step 4: Budget for Additional Costs – Apart from the property cost, budget for stamp duty, registration (usually around 5-6% of the property value in Maharashtra), maintenance fees, and insurance. Ensure these additional expenses are factored into your overall financial plan.
Step 5: Purchase and Leverage for Future Upgrades – Once you’ve secured a property, keep an eye on its value appreciation. For example, if you buy a 1BHK for Rs. 90 lakhs in a growing area like Thane, in five years, the property might appreciate to Rs. 1.2 – 1.3 crore, providing you the equity to upgrade to a larger home or a better location.
(The writer is Partner, Palladian Partners Advisory Pvt Ltd.)
