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Do you have enough money to buy a home?
Devang Shah
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February 22, 2006

Got a question about your money? What you should or should not do with it?

Our expert Devang Shah has the answers.


I am a software professional with around 18 months experience. My monthly income is Rs 17,000. I save around Rs 6,000 every month.

I found my dream home and plan to buy it this year. It should cost me around Rs 10 lakh (Rs 1 million).

My only investment is in a unit linked insurance plan.

 - Debapriya Roy

Dear Debapriya,

Let me talk about your investments first.

Why have you invested in the ULIP? If you do not have a good answer for that, please actively consider taking 'non-sales' advice for your investment decisions. Normally, people just invest based on the advice of their insurance agents and end up making the wrong investments.

Usually Unit Linked plans are an expensive way to save up.

Where your apartment is concerned, how are you going to fund the downpayment? Do you have any savings?

If you do not have the money, you might be tempted to invest your monthly savings in 'high return' investments. Most people are investing in the stock market because it is currently giving good returns. Lots of them have forgotten (or want to forget) how investors lost their shirts in the 2000 crash.

Please do remember that high returns and high risk go hand in hand. Risk isn't necessarily bad, but make a conscious decision to take the risk, keeping the downside possibility firmly in your mind.

If you do have the money, your current savings are likely to be equivalent to the Equated Monthly Installment for the amount of loan that would go for a Rs 10 lakh loan.

My advice would be to keep the habit of saving (and investing) even after the home is bought and the EMI kicks in. It will be difficult to begin with, so start small� even Rs 500, if not more.




Illustration: Dominic Xavier

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