For millions of Indians, owning a roof above their head continues to remain a distant dream. Yet, there is the upwardly mobile younger generation with the wherewithal to accomplish the dream with significantly lesser pain compared to the earlier generations. But, within the real estate sector, this segment suffers from certain chronic illnesses that hamper healthy growth.
- Ability of individuals to service large debt for 2 decades or more
- Taking the plunger without factoring in all pros and cons
- Poor personal finance planning
- Yearning for flamboyant life style
- High profile advertisements with half truths
For the middle class and upper middle class Indian, household income today constitutes monthly salaries earned by 2 or more members of the family. Thus, in a household where both parents are still working and another son/daughter starts his/her own family under the same roof, there is a problem of plenty. The disposable income must be canalized into long term investment to save tax as well as prevent frivolous expenditure. At this stage, proportionate to the size of the disposable income, aspirations rise albeit, disproportionately.
For instance, for a family with a disposable income of Rs.1, 00,000.00 per month, it is sensible to enter a long term commitment of say Rs.60,000 per month towards debt servicing. Everything is hunky dory when things are working with clockwork precision. But, life does not move on even keel over an extended period of time. One should remember that the Indian middle class is building on the strength of the IT sector and the digital world in general. Most other sectors have either stagnated or are lagging behind by miles. This large-scale dependence on a singular sector can potentially turn very sour, if India experiences a Lehman Bros or Fannie& Mae. Such an eventuality can be far more catastrophic than it had been for the West. A good driver should be more cautious while cruising at a thrilling speed.
Deep knowledge of the pros and cons before taking the plunge
Extensive knowledge of the pros and cons and factoring in the impossible scenario can still keep the home buyers unscathed. But how many actually do that exercise, is the million dollar question.
Personal finance planning
With cost of living, particularly in the large metros perpetually on the rise, personal finance planning takes the center stage. A diversified portfolio of investments, rather than ploughing everything into a single basket will ensure the financial health of individuals over the longer term.
Flamboyant life style
The electronic media works overtime egging the Indian middle class with a flamboyant lifestyle. But, it is for the individual to determine where he/she should pitch. Sadly, prudence takes a holiday and many walk into a debt trap after the initial euphoria.
The silver lining in the cloud
One way home buyers can keep themselves fully protected and enjoy their dream home is to explore every possible insurance option. The true value of insurance should be reckoned, rather than merely looking at it as a tax saver. This way, the middle class Indian homeowner will protect not just his own home, but also the Indian realty sector on its growth trajectory.