Smart property investment strategies: Key mistakes homebuyers should avoid when purchasing an apartment

Buying a property makes sense only if you're sure about living in the city. Many end up paying EMI in one city while renting in another due to career moves.

Buying a home in cities like Mumbai, Kolkata or Delhi comes with hidden costs that many buyers overlook. From the hefty expense of interior work—such as cupboards and lighting—to the financial strain of planning home loans based on dual incomes, it's important to plan carefully. Financial advisors warn about these common missteps and offer advice on how to navigate the complex homeownership journey. Whether you’re certain about staying in one city or planning to upgrade later, it’s crucial to set a realistic budget and make informed decisions from the start.

Property investment tips: Here's a look at mistakes homebuyers should avoid when purchasing an apartment. (Representational photo) (Pixabay)

Arjun Sen, age 35 and Meghna Sen, age 33, based in Kolkata, earn a total monthly income of ₹3.2 lakh per month. They have ₹25 lakh of savings and investments, with ₹8 lakh kept in fixed deposits, ₹12 lakh in mutual funds and ₹5 lakh in public provident fund (PPF). They spend ₹1.2 lakh per month.

They are planning to purchase a 3BHK flat at New Town worth ₹1.2 crore. They intend to pay ₹30 lakh as down payment and take a ₹90-lakh home loan for 20 years at a rate of interest of 8.5 per cent. Their EMI would be around ₹78,000 per month.

“We think that it is perhaps a good time for them to invest in a residential property. Their combined monthly salary is sufficient to take care of the monthly installments still leaving ₹1.22 lakh in their hands as savings,” says Gaurav Goel, SEBI Registered Investment Advisor.

However, their current savings and investments are only ₹25 lakh. Out of this, ₹5 lakh are tied up in long term investments and can’t be liquidated unless they complete the minimum period of investment.

“We recommend Arjun and Priya to increase the loan amount to ₹102 lakh (85% of the property value). We think that this can be easily negotiated with the lender. This will reduce the down payment amount to ₹18 lakh and leave ₹7 lakh in their savings and investments,” says Goyal.

EMI will increase but it should be easily managed given their current income stream. Also, if they take a joint loan they can both claim interest deduction of up to ₹2 lakh each under section 24B of the income tax act under the old tax regime.

Let’s take another example. Amit and Priya, a working couple in Mumbai, are planning to buy a ₹2.5 crore apartment in Powai. Amit, a software engineer, earns ₹30 lakh per year, while Priya, a marketing manager, has an annual salary of ₹24 lakh.

Over the years, they have built ₹70 lakh in savings and investments, including ₹30 lakh in fixed deposits and liquid mutual funds, ₹20 lakh in equities and SIPs, and ₹20 lakh in PPF accounts. They plan to use ₹50 lakh from their savings for a 20 per cent down payment.

For the remaining ₹2 crore, they will take a home loan at an 8.5 per cent interest rate for 20 years, with an estimated EMI of ₹1.73 lakh per month.

“Their planned EMI of ₹1.73 lakh would consume approximately 38.4% of their monthly income. This exceeds the recommended 30% threshold for housing costs, which could strain their finances,” says Abhishek Kumar, founder and chief investment advisor of SahajMoney, a financial planning firm.

Also, after putting the down payment they would not have any liquid savings available to manage an emergency situation. “So they should build at least 6 to 12 months of expenses as an emergency fund on an immediate basis,” says Kumar.

This is what prospective buyers should keep in mind before investing in property

“People underestimate post-purchase costs—interiors alone can be expensive. Even basic work like cupboards and lighting can cost ₹15 to ₹20 lakhs, and if you want a premium look, expenses can go much higher,” says Suresh Sadagopan, founder of Ladder7 Financial Advisories.

Also, buying a house only makes sense if you’re sure about staying in that city. Many people buy a home, then move due to career changes, ending up paying EMI in one city and rent in another.

Another mistake people make is that home loans are usually planned based on both spouses' incomes. If one decides to leave their job—say, to take care of children—it can create financial stress because the EMI was set assuming dual incomes.

“Your first house doesn’t have to be your last. If the budget is tight, start with a smaller place, build savings, and upgrade in a few years rather than overcommitting now,” adds Sadagopan.

Anagh Pal is a personal finance expert who writes on real estate, tax, insurance, mutual funds and other topics