A roof over your head is a basic necessity, but if you spend too much of your income on shelter alone, you should be concerned. A big home loan EMI can render you "house poor"—a peculiar situation where the individual owns expensive real estate but has no money left for other expenses after paying the EMI. This week’s cover story focuses on the pitfalls of overinvesting in a house. We also tell you how to maintain a healthy balance between housing and other critical goals.

 

One of the main reasons why family budgets go haywire is delay in getting possession of homes. The double burdens of EMIs and rent can be too costly. Mumbai-based businessman Chintan Valia, 33, should know. Valia booked a flat worth Rs 35 lakh back in 2009. As the builder was a reputed one, Valia was confident that the property would appreciate in value, allowing him to make a neat profit by selling it a few years down the line. He is yet to get possession. Now married and a parent, a chunk of Valia’s income goes towards home loan repayment and rent.

His burden - Bought a flat worth Rs 35 lakh on loan in 2009, but is yet to get possession. He is paying an EMI of Rs 15,000 and Rs 20,000 in rent. His monthly income is Rs 85,000.
 

Housing cost as percentage of income: 41%
 

The way out - Sell the property as soon as construction is completed. "The cost hurts. Very little is left for savings after catering to household expenses," rues Valia. His story is hardly unique. There are thousands sailing in the same boat. The typical Indian who made a huge financial commitment while buying a dream home only to have it become a millstone around his neck. Even those who have got possession are finding it tough to service the home loans. These people own houses worth Rs 60-70 lakh, but after their EMI is paid, they have little money for other expenses.

Too often, lulled into a false sense of security, many home-buyers make the longterm financial commitment without factoring in the costs that come with the purchase. The home loan EMI is only a part. Society maintenance charges, home insurance premium, cost of décor and property tax can collectively make a big dent in a household’s finances. After shelling out these payments, many are left with hardly any money, ending up compromising on key goals. Turn to page 7 to know if you are paying more than you can afford.