by PrognoAdvisor, Financial Planning
01 Oct , 2018

Is it possible for me to buy a land and construct a house?

Ramesh is an interior designer from Calicut, Kerala. He is aged 39. His wife is a home maker. They want to buya piece of land and construct a house in 5 years. The expected cost in today’s value is Rs.45 lakhs. Currently he can set aside Rs.12 lakhs for the goal. Further, he can save Rs.5000 every month towards this goal. He has investments in mutual funds, chit and life insurance plans. He wants to know if it’s possible to achieve his goal and if so how to go about?

Ramesh’s situation was analysed and provided him strategies and advice to achieve his goal as given below:







Cost of buying land and construting house in today's Value

₹ 45,00,000

Cost after 5 years assuming price change @ 10% p.a.


₹ 72,47,295

Resources Available






Assets set aside for the goal in today's value


₹ 12,00,000

Monthly Savings that can be allocated to this goal


₹ 5,000

Suggested Asset Allocation





Assuming Moderate Risk Tolerance and Short time horizon the following asset allocation is suggested to deploy the assets allocated for the goal and to allocate the savings

Rate of Return expected annually from the suggested asset allocation









Value of Assets set aside for the goal after 5 years


₹ 20,40,352

Value of Savings allocated for the goal after 5 years


₹ 3,75,157

Total resources available at the time of goal


₹ 24,15,510

Shortage at the time of goal




₹ 48,31,785








Take a home loan for the amount equal to the shortage. Assuming a home


Assuming loan interest rate of 10%p.a for 20 year period the EMI will be Rs.47628


If this is not possible then plan for a smaller house


Where to Invest?







Out of the Rs.12 lacs assets, invest Rs.3.6 lacs in diversified equity funds, invest


Rs.4.2 lacs in dynamic bond funds and Rs.4.2lacs in cooperative bank fixed deposit.


Out of the Rs. 5000 monthly savings, start SIP of Rs.1500 in diversified equity fund,


SIP of Rs.1750 in a dynamic bond fund and Rs.1750 in cooperative bank RD account


Review the investments and SIPs once in every year


The above case study is for illustrative purpose only and is not a recommendation or advice for a similar situation you might face since there are many other factors which will require a different approach to your situation.

PrognoAdvisor, the leading Online Financial Planning company, can help you solve your financial concerns and issues through its well-defined analysis and planning process.

Register today to talk to our advisor.

 About The Author


Post Your Comments

blog detail page Ad Vertical - 2



Get Snapshot Of Your Life Goals

Get started