Paying Rs 2 crore for a Rs 1 crore home? What this finance expert wants you to know

Purchasing a home is frequently acknowledged as a major milestone in life. While the joy of discovering the ideal property is natural, it is important for first-time buyers to understand the complete financial implications of owning a home. Many experts believe that homebuyers should consider the costs associated with homeownership when making this important decision.

CA Nitin Kaushik, in a recent post, wrote while owning a home brings security, it’s important to be fully aware of the real cost of long-term borrowing. A home loan spreads your payment over years — but with interest, that adds up to a lot more than the sticker price.

He breaks it down:  Home price: Rs 1 crore

Home loan EMI: Rs 90,000/month

Loan tenure: 20 years

Over 20 years, your total repayment will be:

Rs 90,000 x 12 months x 20 years = Rs 2.16 crore

That’s more than double the cost of the home.

"𝐌𝐢𝐥𝐥𝐞𝐧𝐧𝐢𝐚𝐥𝐬 & 𝐇𝐨𝐦𝐞𝐬: Home cost: ₹1 crore; EMI: ₹90,000/month; Years: 20; You pay ₹2+ crore for a ₹1 crore home. Rent smarter, not harder," Kaushuk wrote.

He added that renting may make better financial sense, especially in the early stages of your career or if you're living in a city temporarily. 

Renting gives you:

> More flexibility

> Lower monthly outgo

> Freedom to invest surplus money elsewhere (like mutual funds, stocks, or even retirement plans) 

Real cost of buying a house

A 2023 report by the National Housing Bank highlighted that over 90% of residential property buyers in India utilise loans to finance their homes. While loans offer a means to build a valuable asset, they also introduce significant costs beyond the initial property price. Many first-time buyers focus on the purchase price without fully realising the other expenses that accumulate over time. 

One of the most substantial hidden costs of home ownership is the interest paid on a home loan. For example, a Rs 50-lakh loan at an 8% interest rate for 20 years can go up to Rs 1 crore. By the end of the term, their total repayment, including interest, could exceed Rs 1 crore, effectively doubling the property’s cost. Such scenarios underscore how interest payments can significantly inflate overall expenses. According to Knight Frank, when all factors like interest, legal fees, and maintenance are considered, the real cost of home ownership can surpass the initial purchase price by up to 40–50% over 15–20 years. 

Beyond interest, various additional expenses further impact the total cost of owning a home. Legal and brokerage fees contribute notably, with surveys by property consultants Anarock and Knight Frank indicating legal fees typically constitute about 0.75% of the property’s cost. Brokerage fees in major Indian cities can vary from 1% to 1.5%, while stamp duty and registration can add up to 6% of the purchase price. Furthermore, home loan processing fees usually range from 0.5% to 1% of the loan amount. These initial costs, combined with ongoing expenses, can catch unsuspecting homeowners by surprise. 

After settling into their new homes, buyers face ongoing costs such as property taxes, maintenance fees, and repairs. These are regular, unavoidable expenses that become part of a homeowner's budget. Knight Frank estimates that annual maintenance and repair costs can range from 0.5% to 1% of the property’s value, emphasising the necessity of accounting for these recurring outlays. When calculating the return on investment, it’s vital to consider all associated costs, including interest and maintenance, as they can reduce the effective ROI by 1–2% annually.