Who Defines Affordability For You?

In its pursuit to provide housing for all, the government is building “affordable” homes. For this purpose, it has also defined the term ─ property bought under a certain value mean affordable homes. While many of you may not qualify to avail of benefits offered by the government since you earn a fatter salary check than what is acceptable to apply for loan waivers, the babel about the word “affordable” keeps you in an utter state of confusion. The entire nation is talking about affordability, and, you could hardly be blamed for mixing up your own theories. However, the word “affordable” means something different to each one of us ─ what is affordable to your neighbour might not be affordable for you.  It is in this context that we should be discussing your home-buying plans and the money involved in it.

Irrespective of what the rules lay, homes that cost you less than Rs 50 lakh are referred to as “affordable” units. However, an individual who earns Rs 50,000 as his in-hand monthly salary might find it quite difficult to afford this “affordable” unit. (Mind you, Rs 50,000 is a decent amount of money to be earned monthly, by Indian standards.)

Since a bank would typically offer 80 per cent of the property value as loan, this earner is expected to have in his saving account at least Rs 14 lakh. (If he lives in Delhi, he would have to pay six per cent of the property value in stamp duty, one per cent as registration charge and another one per cent as brokerage charge.) This means he is left alone to arrange 27 per cent of the property value on his own. Now, let us not theorise it for the sake of it! There are no prizes for guessing that would be a gigantic task to accomplish, even for those earning a “fat” salary check of Rs 50,000 a month. It might take several years of saving and investing before one is able to collect that kind of funds, considering you are paying your rent in the big city and taking care of other banal things. The flow of your expense has been such that the hole in your pocket remains un-mended. To cut a long story short, the affordable unit is not really affordable for you. If you entertained any delusions about your riches earlier, a short stroll in the real estate market would cure you of that ailment.

Now arises the question, should you put your home-buying plans on backburner because affordability of property, irrespective of its huge popularity as a concept in today’s Indian realty, evades you? It might be a mistake, to be sure, to let that happen. If you are depending on your salary check getting fatter, you must most certainly also depend on the property price tags getting more expensive. At any point, the situation would remain the same, by and large. The best way to deal with the situation is to define affordability according to your personal station and make your move. When they say, the time to buy property is “now”, there is no need to read ulterior motives into the statement ─ if you gave the idea a deeper thought, the interpretation would attain a more personal significance.

In the example cited above, the man could go for a home worth up to Rs 30 lakh. He may find it quite affordable to buy his home “today”. “Now” certainly is the time to buy property if you are able to decode and define the word affordability according to your own suitability.