How will you plan financially before buying house?

Q: If I intend to buy a 3BHK house five years from now in Noida how do I start planning for it today taking into account that there will be inflation etc.? How much money should I put aside for it?

A: Generally speaking if a house is going to cost you Rs 10 lakh and assume you take about 5 percent inflation and five years later, so 5 percent every year, that means Rs 50,000 of an increment every year, five years later expect that the house will cost you Rs 12.5 lakh. To be able to generate that Rs 12.5 lakh in five years broadly speaking what you need to do is at least be able to put away Rs 1 lakh every year. You can break that down monthly and then put up that money into a fixed deposit or some sort of a corporate recurring deposit or a postal deposit, whatever you like, but something that is going to accumulate your money to about this amount of money. If you do not have the monthly possibility, if you have a lump sum then you need to proportionately work and say that you need about 1.5 times your return in about a five year period. That means if you need Rs 12 lakh, then you will need to put away about Rs 8 lakh if you have that now. So there are lots of tools available on lot of sites, some of the tools are free and taking professional service is also not so expensive, so you might even want to consider doing that. Therefore you will get a pretty good idea about it. It is not very complicated, but not very straight forward also if you do not have mathematical skills.