A 27-year-old-technology professional who has been employed with a gaming company for the past five years, Tejas was sent on an overseas assignment by his company. As his remuneration spiralled, Tejas bought an apartment, believing that it would prompt him to save more. However, due pandemic and global turmoil, his company trimmed his take-home salary. Presently, he is finding it difficult to manage the EMI payments. His other investments include a PPF account and some investment in an ELSS fund. Tejas wants his father to lend a helping hand and is wondering what he should have done differently.
Getty Images
2/4
Holding on to assets
Tejas should assess realistically if it is possible for him to continue with the home loan, given the current uncertainty associated with his job. Exiting the real estate investment may be a good idea to release the stress on his income. However, if Tejas can meet his EMI obligations for a few more months before he sells, he should do so. This will help him benefit from the lower taxes on long-term capital gains on assets held for at least three years. He can borrow money from his father or take a loan against the PPF account to generate the funds required. Any premium that he receives on the sale of his apartment can be used to make investments that are suitable to the current profile of his income.
Getty Images
3/4
Stability in job is critical
Tejas made the error of committing to a large, long-term and illiquid investment before his income and savings had stabilised. Additionally, the absence of an emergency fund hurt his chances of being able to service the loan during the temporary disruption in his professional life. At this stage in his career, where income may be uncertain and savings may be insufficient, Tejas should only consider investments that can be based on realistic estimates. Short-term spurts in income should be invested as and when they happen, and not be committed in advance.
Getty Images
4/4
Flexible investments
The investments should be flexible to allow him to take a break in making them or even discontinue them if there is a shortfall in income. He should be able to do so without suffering penalties, cancellation or affecting the value of the investments already made. Also, it should be possible to easily liquidate those investments if he needs funds to support his financial obligations. Tejas should evaluate if the investments he is considering meet these essential features till his income achieves a degree of assurance for him to plan long-term fixed commitments, such as a real estate investment.
