ttLet me first talk about the recent developments surrounding the Real Estate Markets in India.
- RERA– Real Estate Regulation Act is the first regulatory action to protect and safeguard the buyers. It has committed to give full protection to the end buyer and remove all malpractices in the industry. The Act is in a very nascent stage. Hence, can not comment on its execution.
- Demonetisation– The Real Estate industry was the worst hit by the sudden ban of Rs 500 and Rs 1000 currency note, which has not recovered from the shocks of demonetization.
Bottom Line- Buying a house at this stage for INVESTMENT PURPOSE is not realistic as the gains would not be that fruitful. If you are buying a house for living purposes, then it’s a right bet because you will get it at the right price. It will help in effective and efficient tax planning. Whereas, if your rationale is for investment purpose. I would suggest going for mutual funds as it is relatively less risk when compared with Real Estate.
The following strategy can work well in your case.
- For your down payment– Invest in Debt Funds and Start an STP
Debt Funds include short-term and ultra short-term schemes which are apt to park some bonus or surplus funds and if you think that the markets are high and there will be a correction in the next 5-6 months. Then, invest in an ultra short term debt fund and start an STP(Systematic Transfer Plan). This option is only available in schemes within the same AMC. Hence, while choosing debt funds also choose any popular equity-based scheme. Remember, choose the debt funds with minimal or nil exit load as well as low expense ratio. This will help you in getting the maximum returns from the Investment.
Both the schemes have no exit load and the expense ratio is between 0.15-0.30% which is fairly low.
Alternatively, the popular schemes in the same AMC where you can start an STP are
2. Alternatives investment option for EMI– Equity Linked Saving Scheme(ELSS)– ELSS falls under a specific section of Income Tax called as 80C, wherein you are allowed to invest upto 1.5 Lakhs per annum in ELSS or any other specific investment options like Life Insurance Premium, PPF, EPF etc. Although ELSS and all equity related schemes offer tax benefits on returns if invested for more than 3 years. ELSS offers Additional benefit in which the amount invested in any ELSS scheme or any other investment option specific under section 80C (upto 1.5 lakhs) is deducted from your annual income to arrive at your taxable income which sometimes helps in reducing your slab rate. Always check your limit of 80C before starting any ELSS SIP or Lump sum.