You might get away with your mistakes you committed while buying equity shares if the buying value was low. Since you can buy as few as a single share, you get a second chance to rectify your mistakes. Probably you invested in a company with unsound fundamentals or bought shares at expensive valuations. This won’t impact your finances severely. But if you take hasty decisions while buying property without bothering to make a good assessment of proposals, you might not get a second chance to correct yourself. Impact on your finances too can be devastating. Buying home is a big decision since buying value is high and often requires buyers to rely on loaned money. If buying home in the New Year is on your radar then you must do your homework before committing money to property.

Here’s your checklist...

Affordability: Budgeting should be the starting point of your assessment process as this helps you decide upon the city or locality within a city you may afford to buy property in. Desire of owning a plush home in the prime locality may affect your finances in future if you fail to estimate your future income and expenditure, and make assessment of the impact on repayment of existing debts if you were to take a fresh loan for buying property. True that you and your spouse earn decent money every month and you might be willing to shell out entire salary of any one of you for paying home loan Equated Monthly Installments (EMIs). This may sound rational as you can still meet your expenses comfortably. But this is where you need to be cautious. You might be meeting your expenses today but you also need to make sure that you would be able to do so even in future. As the life stage changes expenditure pattern also undergoes a change. This is where forecasting comes into picture. PersonalFN believes that one may have EMI to income ratio of about 40% of the total household income.

Property Exploration: Once you are sure of affordability, you may then want to shortlist properties. One must assess available options on some predetermined parameters given below but shouldn’t restrict to only these.
 

• Locality
• Time lag for getting the possession (in case of on-going construction)
• Age of the property (in case of already constructed properties)
• Quality of Construction
• Maintenance cost
   

The process of property search may start with identifying...
 

• Who is the builder?
• What has been his track record?
• Has he completed the construction of his projects as per schedule?
• Visit the site and inspect the quality of construction
• The rate which he is offering for the amenities offered
• You may also visit other sites developed by the same builder just to check whether he has fulfilled all promises made and offered amenities as promise
• Title of the property on which the construction is taking place or has taken place (to ensure that it free from any encumbrances and litigations)
• Has he obtained all statutory permissions
• In case of a ready property - i.e. newly constructed or a resale property, has a society being formed
• Is the builder listed or recognised by the housing finance company (in case if you want to avail a home loan facility)
   

Home Financing: Financing is the most critical aspect of buying a property. You should be wary of improper practices followed by builders. Your builder may ask you to pay a part of total purchase in cash. You must insist on paying through cheque. This will not only help you register your property purchase at the value you are actually paying but will also let you optimise tax benefits offered. Also source of finance too matters for availing tax benefits. For example, repayment of principal would be allowed as a deduction from taxable income only if the loan is taken from notified institutions and banks. Further, whenever possible applying for loan and buying property in joint name may allow you to optimise tax benefits.

PersonalFN View:
PersonalFN believes that if you are buying a house for dwelling, anytime might be a good time to invest (assuming you have assessed the affordability). But if you want to buy a house for the purpose of investment then you should take a holistic view of your portfolio. PersonalFN is of the view that investments should be made keeping your goals in mind. Real estate as an asset class is illiquid and riskier than most of debt oriented investments. You must assess whether your current financial circumstances allow you to purchase property in 2014. As a New Year resolution you might like to follow asset allocation detailed in your financial plan meticulously. Personalised financial plan acts as your guide in taking decisions such as purchasing a property.

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