My partner (31) and I (33) have a combined monthly income of Rs 500,000 working in the IT sector. We are currently residing in Bangalore on rent, paying Rs 55,000 per month. Moreover, we have a house in Hyderabad with a monthly EMI of Rs 125,000 on a home loan amounting to Rs 1.35 crore, where my parents currently live. Our savings amount to Rs 7.5 million, with an average monthly saving of Rs 250,000.

My wife is planning to buy an independent house in the older parts of Bangalore due to her strong emotional connection with the city as she is a Bangalore native. We question whether it is financially feasible for us to make this investment. We are looking for practical advice on this.

Expert advice from Animesh Hardia, SVP, Quantitative Research at 1 Finance

Rising rental prices in Bangalore have led to a noticeable change in the real estate market trends. Bangalore now tops the list of Indian cities with the fastest growing residential rental rates. Recent reports have revealed a staggering 90% increase in housing rents in the Bagalur region over the last four years. Additionally, other sought-after areas like Whitefield and Sarjapur Road have also seen substantial increases in rental prices over the past five years, ranking third and fourth respectively in terms of rental increases. Rental costs in these areas have increased by 80-85%. In 2019, the average price of residential properties in Bangalore stood at Rs 4,300 per sq ft, and this figure is expected to rise to Rs 8,151 per sq ft by the end of 2024.

As dual-income IT professionals in Bangalore, with substantial savings and existing real estate investments, you exemplify the conscious approach to wealth creation that characterizes many well-educated professionals today. Your goal of owning an independent house in Old Bangalore while maintaining financial stability requires careful consideration of opportunities and constraints.

Let’s look at each factor one by one.

Your current financial situation:

Monthly Finance Amount (Rs)
Net Income* 5,00,000
Existing EMI 1,25,000
Rent 55,000
Monthly savings 2,50,000
Other expenses 70,000
*I assume that Rs 500,000 is your collective monthly after-tax income (or net income).

Understanding your borrowing capacity

Your debt-to-income ratio (DTI), which measures your monthly debt repayments against your income, currently stands at 25% – due to the monthly EMI you pay for your parents’ house in Hyderabad.

Financial experts recommend keeping your DTI ratio below 40-45% for sustainable debt management.

For you this means:
• Total EMI capacity: Rs 2,00,000-2,25,000
• Additional EMI Capacity: Rs 75,000-1,00,000

This will ensure that you have enough monthly savings to build financial assets for the future and that you are not spending too much of your income on loan repayments. Taking the upper limit of ₹100,000 as your new EMI, based on affordability checks, lenders might estimate the following for you:

• Maximum possible new loan: Rs 11.1 million (9% interest, tenure of 20 years)
• Maximum property value: Rs 13.9 million (with 80% bank financing)
• Down payment required: Rs 2.8 million

Banks can only lend up to 80% of the property value as a home loan. So, the independent house you could afford in the older parts of Bangalore is around
(Rs 11.1 million/80%) or Rs 13.9 million.

The difference of Rs 2.8 million (Rs 13.9 million minus Rs 11.1 million) will have to constitute the down payment on the Rs 7.5 million in savings you currently have.

Old Bangalore Real Estate Market Analysis

Now that we have established the top price of a house you could afford (i.e. Rs 13.9 million), let’s look at the prices in old areas of Bangalore like Jayanagar, Malleswaram, Basavanagudi, Shivajinagar, etc. It seems that the prices per square foot (/sq ft) of independent houses here vary from Rs 15,000 to Rs 35,000 depending on the size of the land, age and condition of the house.

Assuming Rs 20,000/m². In square feet and land area of ​​2000 square feet, the price of the independent house will be almost Rs 40 million. Registration and stamp fees may be separate from this price.

Strategic approach to real estate investment

Based on improving your lifestyle while building a reasonable corpus, let’s explore a balanced approach to real estate investing that matches your financial behavior and aspirations. Here is a strategic framework that takes into account both your emotional connection to old Bangalore and the need for financial prudence.

Immediate steps

Continue your strong savings pattern while building your corpus.
Do thorough research (visit at least 15-20 properties) to understand:

• Price variations according to different areas

• Property conditions and renovation needs

• Future development plans in each locality

Look for value opportunities in emerging areas adjacent to old Bangalore.
Consider slightly smaller plots (1,200 to 1,500 square feet) to bring the property value closer to your budget.

Market reality and options

The current price gap between your affordable range (Rs 13.9 million) and market prices (Rs 40 million) presents three potential approaches:

Wait and build a corpus

• Maintain current savings rate while monitoring market trends.

• Allow your income to increase through career growth.

• Let your investments appreciate over time.

• Target the purchase of a property in 3 to 5 years, when financial capacity better aligns with market prices.

Adjust expectations

• Consider properties in upcoming areas near old Bangalore

• Look at smaller parcels or older properties in need of renovation.

• Look for areas like KR Puram or Yelahanka that offer a similar community feel at lower prices.
Phase your purchase

• Start now with a smaller property

• Build equity through property appreciation

• Later shift to your dream home in old Bangalore.

The way forward

Although the current market price of Rs 40 million for an independent house in old Bangalore seems beyond your immediate reach, achieving this goal is possible with proper planning. Consider these next steps:

Continue to build your corpus while monitoring market opportunities.
Explore emerging areas that could offer better value.
Consider a phased approach to land ownership.
Maintain investment discipline while working toward your goal.

Remember, real estate investing should enhance, not strain, your financial well-being. Take the time to find the right property that balances your emotional connection to old Bangalore with your financial prudence.

Consider consulting with a financial advisor to create a comprehensive plan that accounts for this important investment while maintaining your other financial goals.