How Much Money Should I Save Up Before Investing in the Indian Real Estate Market?

Investing in the Indian real estate market is a lucrative opportunity, but it requires careful financial planning. Be it residential, commercial, or rental properties; having an idea of all funds required before investing is crucial. Here is a breakdown of some financial aspects that you need to take into consideration before jumping in.

1. The Down Payment and Cost of Property

Typically, banks and financial institutions in India provide funding for 75 to 90% of the property value, as is done for home loans. This is subject to the borrower's creditworthiness and property type. Accordingly, the customer buys a house with a down payment of 10-25 percent.

Suppose you are purchasing property/investments for ₹50 lakh-value; it means you should save at least ₹5-12.5 lakh to be able to make a down payment.

2. Registration Fee and Stamp Duty Charges

Apart from the down payment, there are also other charges like registration and stamp duty. Such fees are state-wise and vary between 5 and 7 percent of the property value as per the market. If it's a property of ₹50 lakhs, you may further need to have set aside a few lakhs, about ₹2.5-3.5 lakh, to pay these charges.

3. Expenses for Legal Service Documentation

Every part of the real estate transaction is legal documentation, consisting of drafting agreements, property papers verification, and legal consulting. Costs may range from ₹25,000 up to ₹1 lakh, depending on how complicated the deal is and lawyer fees.

4. Loan Processing and Brokerage Fees

Most banks charge a loan processing fee which is around zero point five to one percent of the loan amount. So if you take the home loan of 40 lakhs, your processing fee will be in between ₹20,000-₹40,000. In addition, if you hire a real estate broker, their commission would be 1-2% of the price of the property so as to amount to ₹50,000-₹1 lakh for a ₹50 lakh property.

5. Emergency Fund for Unplanned Expenses

Within real estate investments, many things like repair services or rework or even simple maintenance activity tend to surface as surprising expenditure. Therefore, it is a good idea to save about 5-10% of the property value as a contingency. In this case, for an asset worth even ₹50 lakh, it would be good to set aside ₹2.5-5 lakh for emergencies.

6. Monthly Loan EMIs and Other Continuing Costs

When you are financing your property through a loan, you need to pay monthly EMIs for that. For example, a ₹40 lakh loan at 8% interest over 20 years will result in an EMI of ₹33,500 approximately. Additional ongoing costs such as property taxes, society maintenance fees, and utility bills need to be considered in the budget aside from the EMIs.

Final Estimate: How Much You Should Be Saving?

If the value of your property is ₹50 lakhs, the estimation of the initial savings required is roughly like this:

• Down Payment: ₹5- 12.5 lakh

• Stamp Duty & Registration: ₹2.5-3.5 lakhs

• Legal & Documentation Fees: ₹25,000-1 lakhs

• Loan Processing & Brokerage: ₹70000-1.4 lakhs

• Emergency Fund: ₹2.5-5 lakhs

Total Savings Required: ₹11-23 lakhs