Purchasing a house is a significant life choice, particularly in Mumbai, a city known for its ever-increasing real estate prices. Nevertheless, there is a growing trend among young professionals and couples who are opting to invest in their own homes at a youthful stage in life.
When contemplating the purchase of a house, it's undoubtedly a major decision, especially in cities like Mumbai, where real estate prices exhibit considerable fluctuations. Nevertheless, there's a growing trend among young professionals to opt for early homeownership or property investment.
Stability and Security
One of the best reasons for homeownership is the profound sense of stability and security it brings. When you live in a rented home you often have to face the uncertainty of rent hikes and potential evictions while owning a home provides you with control over your living situation.
Purchasing a home also bestows a sense of financial freedom. You're not bound by monthly rent or mortgage payments, which allows you to channel your resources toward achieving your personal and financial objectives.
Mumbai's Escalating Real Estate Prices
Mumbai consistently ranks among India's most expensive real estate markets, with property prices experiencing a relentless upward trajectory. According to Knight Frank, Mumbai witnessed an average annual price appreciation of 7% for residential properties between 2010 and 2020.
The rapid ascent in property values has made it increasingly challenging for young buyers to realize their dream of homeownership in the future, especially when they have other financial commitments like children's education and retirement planning. Consequently, investing in a property at an early stage in life can empower individuals to secure their future without the perpetual worry of surging real estate prices.
When you're young, you often have the financial means to handle situations like taking out a loan or arranging money for your home, which allows you to efficiently manage your household finances. This flexibility enables you to pursue various opportunities, including making money easily. Young people typically possess a strong earning potential, making it easier to manage their finances.
Aspiring to purchase a home can be a realistic goal when you are young and employed with a stable salary or engaged in business. Your steady income allows you to comfortably afford a home within your salary range, making it straightforward to secure a bank loan for the purchase.
Banks predict the borrower's future cash flows using a DCF analysis before deciding whether to approve a loan application. As a result of their longer earning potential than older borrowers, young borrowers often have greater expected cash flows. Due to the increased possibility that they would be able to repay their loans, this makes them more desirable to lenders.
The RAROC is a measure of a bank's profitability on a risk-adjusted basis. Young people are typically seen as less risky borrowers than older borrowers, as they have a lower probability of default.
The Bottom Line
The insights this blog shares offer only a brief overview of the many advantages of homeownership at a young age. A home is an extraordinary place where life stories are written, and family bonds are nurtured, making it a unique and cherished space for every individual.