Aryan and Pooja have moved to Delhi after living in Pune for about eight years. He has his own house in Pune, bought with a housing loan, and has eight more years to repay. His daughter is 22 years old and planning to pursue an MBA degree. The family shifted due to Aryan’s promotion and now plans to buy a house in Delhi as well. They feel that instead of paying the rent, they should take another loan and pay the EMI to build another property. What could be the implications of this plan going forward?


two payments EMI requires a high level of revenue and savings. If they don’t have these, they will end up using expensive personal and credit card debt to meet any short-term needs. They will save less after paying two EMIs, reducing their ability to invest in other properties. Thus, their portfolio will become more flexible, containing two large, but illiquid, assets.

Raising money for daughter’s education and marriage will become difficult. It may sound better to build a property than to pay rent, but the two are not comparable. In a city like Delhi, the rent does not exceed 3-4% of the property value, whereas the home loan interest can be up to 11%. They will increase their finances to create an asset that is difficult to sell or earn income. Appreciation may be of little real use to the family. Therefore, it may be wise to sell a property in Pune to continue paying rent in the new city or buy a new one in Delhi.

Content on this page is courtesy of Center for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.