Are you liquidating the right investment when it comes to property purchase?

Authored by Abhishek Kulkarni, Chairman and Managing Director of Million Sqft Realty Pvt Ltd Property purchase is one of the most crucial decision an investor takes hence it is very imperative for probable buyers and investors to zero-down on the various investments when it comes to buying a residential property. While you settle down for a property, the most crucial thing that one needs to be sure of is having the sufficient funds and liquidity in order to make the down payment. Making financial arrangements is no easy task, it requires plentiful planning and implementation to ensure a smooth and streamlined investment process when it comes to buying your dream home. Planning Age of a person plays an important role in financial planning for capitalizing in a home. Below mentioned tips will assist you in your planning process. Buyers falling under the age group of 25-40 years Presuming the end-user falls under the age bracket of 25-40 years, wherein he is anticipated to take a bigger component of the property value in the form of a home loan, he would still be required to scout for about twenty to thirty percent of the investment. In such a situation, the buyer should be well-equipped at least a year in advance prior to making the big decision of property purchase. Since a substantial chunk of a characteristic investor’s resources is expected to be capitalized in volatile asset classes like gold and equities to name a few, one must consider exiting out of these in a staggered manner over the time interval of a year. Ganesh Kumar (name changed), an inhabitant of Hyderabad had a bulk of his reserves in equity stocks prior to deciding to make an investment in the property market. Within equity stocks, his funds were chiefly focussed in mid and small cap stocks. Considering the fact that the previous year witnessed mid and small-cap stocks depreciating at twelve to thirty percent on an average, his net savings kitty of INR 20 lakh perceived a loss of about INR 1.5 lakh during this phase. Currently, he has postponed his real estate acquisition and is in a quandary as to whether to exit out of equities at a lesser value. Preferably he should have expanded his portfolio among other asset classes like Gold and fixed deposits and should have started to liquidate his stocks from a year ago, having proper know-how of the forthcoming monitory necessity for owning a house. The above-mentioned scenario brings us to the question of where should one consider investing for a small period of time post clearing up from volatile assets. A big blunder that most potential buyers commit is by keeping the finances in a savings account of financial institutions. This is possibly an interval when one might require proper guidance from a skilled financial advisor who would essentially guide the investor to invest the money in liquid mutual funds throughout the short-term period up to the property purchase. You might comprehend on the fact that how come liquid mutual funds stand out as compared to the savings account in banks. This is due to their slightly higher returns while also offering liquidity in the form of the following day bank credit if the withdrawal request is given today. People belonging to the age bracket of 40-60 years For buyers in the age bracket of forty to sixty years of age, the loan component is possibly going to be lesser while the necessity of down payment is much higher. So, operative liquidation of corpus needed for property procurement should be all the more judicious in nature.  For example, a home buyer aged fifty years is expected to have more than fifty to sixty percent coming from his own contribution. Such a huge funding requirement demands a delicate execution and hence referring and checking with a financial advisor is mandatory. So, the entire planning should to be done at least 2 to 3 years in advance with money lying in dicey asset classes being transferred to more liquid ones in an orderly manner. Buyers falling under the age category of 60 years and above For ages sixty years and above, owing to the fact that there is no main income sources involved and there are lesser probabilities of obtaining a home loan, the funding should  be done by one's own economic sources. These customers mostly trade their prevailing flats for a new one- essentially opting for an upgrade or go in for renovation. In both the cases, making a financial arrangement is not a very challenging task. Nevertheless, for people who are progressing from a smaller flat to a bigger one, are required to go through the procedure very prudently. Like how investing in a home can be a 6 month procedure, on the contrary, selling a house can also take about six months. It is always preferable to scout for a buyer for your flat prior to deciding to invest in a new flat for yourself. During the temporary phase, they can choose to reside on a rental basis in the same flat before they purchase another flat for themselves.