Planning Finances for a ₹1 Crore Home

Achieve your dream homeownership with a detailed and actionable roadmap.

Buying a home is not just a financial milestone; it’s a dream that represents security, stability, and success. A house worth ₹1 crore is a significant investment that requires meticulous planning, disciplined execution, and a strategic approach. This guide will provide you with detailed steps to plan your finances, along with a real-life example to make the process relatable and actionable.

Step 1: Define Your Goal – The Foundation of Planning

Start by clearly defining your home-buying goal:

Type of Home: A 3BHK apartment with modern amenities.
Location: A metropolitan area with excellent connectivity, reputed schools, healthcare facilities, and nearby markets.
Timeline: A realistic goal of 5 years to save and plan.
Budget: ₹1 crore, considering current market trends and property rates in desired locations.

Why This Is Important: Setting clear goals gives direction to your savings and investment efforts. It also motivates you to stick to the plan.

Step 2: Assess Your Financial Health

Evaluate your current financial situation to determine how much you can save and allocate towards this goal:

Income: ₹1,50,000 per month.
Fixed Expenses: ₹60,000/month (rent, groceries, utilities, transportation).
Existing Debt: ₹8 lakhs personal loan with an EMI of ₹20,000/month (3 years remaining).
Savings: ₹7,00,000 in fixed deposits and mutual funds.
Surplus Income: ₹1,50,000 – ₹60,000 – ₹20,000 = ₹70,000 per month.

Why This Is Important: Understanding your financial health helps you identify how much you can save without disrupting your lifestyle.

Step 3: Estimate the Costs of Buying a ₹1 Crore House

Buying a house is more than just the sticker price. Here’s a breakdown of associated costs:

Down Payment: ₹20 lakhs (20% of the house’s value).
Stamp Duty and Registration Fees: ₹7 lakhs (approximately 7% of the property value).
Furnishing and Interiors: ₹5 lakhs for furniture, appliances, and décor.
Other Costs: ₹3 lakhs for brokerage fees, moving expenses, and minor renovations.
Home Loan EMI: For a loan of ₹80 lakhs at 8.5% interest for 20 years, the EMI will be ₹69,192/month.

Total Initial Funds Required: ₹35 lakhs (down payment + other costs).

Why This Is Important: Knowing the full cost ensures you plan for all aspects of homeownership without unpleasant surprises.

Step 4: Develop a Savings Plan

Based on the required ₹35 lakhs, let’s create a step-by-step savings strategy:

Target Savings: ₹35 lakhs in 5 years.
Monthly Savings Required: ₹35,00,000 ÷ 60 months = ₹58,333.

Real-Life Application:

The person in this example has a surplus of ₹70,000 per month. By saving ₹58,333/month consistently, they will comfortably meet their goal in 5 years.

Why This Is Important: Breaking down the savings into manageable monthly goals makes the target achievable and less intimidating.

Step 5: Grow Your Savings with Strategic Investments

To ensure your money grows while you save, invest wisely:

Debt Mutual Funds or Fixed Deposits: Allocate ₹30,000/month for stable returns of ~6% annually.
Equity Mutual Funds: Allocate ₹20,000/month to equity funds with an expected annual return of ~10%.
Emergency Fund: Set aside ₹10,000/month in a liquid fund to build an emergency buffer.

Expected Outcome Over 5 Years:

Debt Funds: ₹30,000/month → ₹21.6 lakhs.
Equity Funds: ₹20,000/month → ₹15.5 lakhs.
Total Savings: ₹37.1 lakhs (exceeding the target and providing a buffer).

Why This Is Important: Investing helps combat inflation and ensures your money grows faster than in a regular savings account.

Step 6: Build and Maintain a Strong Credit Score

A good credit score (750 or higher) is essential for securing a home loan with a favorable interest rate. Here’s how to improve your credit score:

Pay off the ₹8 lakhs personal loan in 3 years without delays.
Avoid taking new loans or credit cards during the saving period.
Keep your credit utilization ratio below 30%.
Check your credit report annually for errors and discrepancies.

Why This Is Important: A strong credit score can save you lakhs in interest costs over the tenure of your home loan.

Step 7: Plan for the Home Loan

When the time comes to buy the house, choosing the right home loan is crucial:

Loan Amount: ₹80 lakhs.
Tenure: 20 years.
EMI: ₹69,192/month (46% of monthly income).
Prepayment: Plan to make partial prepayments during the loan tenure to reduce the overall interest burden.

Why This Is Important: A well-structured home loan ensures affordability while preserving your financial health.

Step 8: Prepare an Emergency Fund

An emergency fund acts as a safety net for unforeseen circumstances, such as job loss or medical emergencies:

Save at least 6 months of expenses and EMIs.
Target Fund: (₹60,000 expenses + ₹69,192 EMI) × 6 months = ₹7.75 lakhs.

Why This Is Important: An emergency fund ensures you can continue meeting your financial obligations without stress.

Step 9: Protect Your Investment

Safeguard your home and financial future:

Home Insurance: Protect against risks like fire, natural disasters, or theft.
Term Insurance: Ensure your family can repay the home loan in case of an unforeseen event. Opt for coverage of at least ₹80 lakhs (loan amount).

Why This Is Important: Insurance provides peace of mind and financial security.

Step 10: Monitor and Adjust Your Plan

Regularly review your savings and investment strategy:

Check progress every 6 months to ensure you’re on track.
Adjust investments if market conditions change.
Revisit your goal if property prices or personal circumstances change.

Why This Is Important: Monitoring keeps your plan flexible and ensures you achieve your goal despite life’s uncertainties.

Real-Life Example Recap

Here’s how the person in our example will plan to buy a ₹1 crore house:

Income: ₹1,50,000/month.
Savings Plan: Save ₹58,333/month over 5 years.
Investments:
- ₹30,000/month in debt funds → ₹21.6 lakhs.
- ₹20,000/month in equity funds → ₹15.5 lakhs.
- ₹10,000/month in a liquid fund for emergencies.
Target in 5 Years: ₹37.1 lakhs (₹35 lakhs required, ₹2.1 lakhs buffer).
Emergency Fund: ₹7.75 lakhs.

By following this plan, they’ll be financially prepared to purchase their dream home without compromising their lifestyle or financial stability.

Conclusion

Buying a house worth ₹1 crore is a significant commitment, but with proper planning, it becomes an achievable goal. The key is to start early, save consistently, and invest wisely. By managing your finances effectively and sticking to your plan, you can turn the dream of owning a home into a reality.

Start today—your future self will thank you!

Written by CA Prashant
Founder, Secured Penny – Simplifying financial literacy and helping you achieve your goals.