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‘Bear the EMI size in mind while taking a home loan’

business Updated: Sep 26, 2010 20:45 IST
Hindustan Times

Mint, Hindustan Times and NDTV, bring you a personal finance show, “Let’s Talk Money”. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, senior anchor, NDTV, aims to answer viewers’ questions about money-related issues. Here are edited excerpts from the show that aired over the weekend on NDTV Profit and NDTV.

Gopinath K,30, IT professional from Bangalore:

I earn R55,000 per month. I have a mortgage loan for which I pay R20,000 per month. This is a 10-year-old flat in Chennai bought for R15.75 lakh. Since this is very old, I wanted to sell it but the valuation is very low in that area now. Should I try to clear the debt with the money available in hand or should I start looking for a new property? Is it advisable to buy an independent house in a gated community in bigger townships, where they charge large amount towards maintenance etc?

Natarajan: Gopinath, Madipakkam is a mostly low-cost housing area. So the appreciation will be slow. I will advise you to sell that property but with a few basic things in mind.

You should not expose yourself to an EMI (equated monthly installment) which you cannot service comfortably. You are living in Bangalore. And this is more or less an investment for the future for you. So please draw up a comfortable EMI and buy a flat within that budget. Old Mahabalipuram Road is witnessing a housing boom and by the looks of it, that could be an OK area for you to switch to. Provided you find something in the range of R35-40 lakh

Also, remember, if you are identifying an under-construction flat, you need to stick to a very reputed builder and please only book a flat where construction is at least 30-40 per cent completed. Take your time and find what property to switch to. You don’t have to live in it, so don’t be in a hurry to stretch your finances just yet.

Kartar Bhalla, 83, retired officer from New Delhi:

I am a retired officer and my wife is a retired principal (77). We have a good amount of savings in the shape of FDs in nationalised banks, senior citizens’ saving scheme, PPF (public provident fund). We have medical insurance and both of us are covered by CGH (central government health) scheme. We have our own house, free of any encumbrances. We have a free amount of R5 lakh in a bank. Can you suggest whether we can invest this amount to fetch us better returns? We would spend the money on foreign travel.

Halan: I think there are a lot of people who are watching this show, looking at you as a role model saying I wish I had done what Mr Bhalla did to have this dream retirement that you are living. I think we can’t do very much — you have everything sorted out. Interest rates are on the upturn, you will see banks hiking fixed deposit rates very soon and senior citizens do get that 50 basis points bump-up more than the other people, so you can look at that safe boring fixed deposit to solve that problem. You could also look at something called a monthly income plan (MIP) from a mutual fund which is going to take a little bit of risk but you seem to be very well settled. The returns have been very good on some MIPs so I suggest that you look at some good MIPs of some good fund houses and put your money there.

Natarajan: Reliance MIP has been a huge performer in this category and Birla Sun Life MIP II savings 5 is also a good one to look at.