Transform Your Future: Mutual Funds for Your Dream Home

“Mutual funds for building your dream home!” Sounds like a tangy trickle on the tongue, right?
Well, in the rhythmic dance of life, Bollywood has taught us to chant “Roti, Kapda aur Makaan” in one breath—a testament to the emotional and financial significance of owning a home. The dream of having a space to call our own stirs up a medley of feelings, from security to pride. Yet, in the backdrop of soaring real estate prices, turning this dream into reality requires strategic planning and financial finesse. Join us on this cinematic journey as we unravel the steps to not just buying a house but also investing smartly in your dream home. 

Calculating the Dream: Mutual Funds for Building Your Dream Home

Buying a house is not just a transaction; it’s a blend of emotions and finances. As you dream of your perfect haven, consider not only the property’s cost but also additional expenses like registration fees and stamp duty charges. Factor in the future value with the inevitable inflation in real estate, painting a realistic picture of the financial canvas for your dream home. 

A CRISIL report suggests that the typical home price in India has gone up by about 6% annually for the last two decades. But don’t let that average fool you; there’s a ton of diversity from one region to another. Some places in India have seen real estate shoot up like crazy, while others have barely budged in terms of house prices during the same time frame. 

A Closer Look at Changing Property Rates

Annual change in house price index for major cities in the country: 

Crafting Your Financial Blockbuster–Riya’s Tale 

Meet Riya, the protagonist in our story, who dreams of a Mumbai abode. Choosing a systematic investment plan (SIP) with a tantalizing 12% annual return, Riya decides to take a bold step by paying a substantial 60% upfront. This move, reminiscent of those iconic Bollywood twists, reshapes the financial narrative.  Now, let’s break down the financial choreography: 

Case 1: Riya opts for the traditional home-loan strategy 

Case 2: Riya opts for the mutual funds way! 

Conclusion: Opting for the mutual funds strategy appears to be more financially advantageous for Riya, as: 

• Lower Monthly Payments: The SIP required is significantly less than the EMI for the home loan. 
• Lower Total Outlay: The total amount invested over 10 years is less than the total amount paid under the home loan strategy. 
• Potential for Net Gain: With a higher rate of return (15%), Riya could potentially end up with a net gain, effectively reducing the cost of the house even further. 
• To be considered: The growing rate of inflation. India’s inflation rate for 2022 was 6.75, showing a 1.57% increase from 2021. 
• Prepare in Advance: It must be noted that in the case of mutual funds, we have taken 2 crores as the target amount because she needs to prepare in advance and the target will be achieved after 10 years. Hence, in 10 years, it is assumed that the house that costs 1 crore today will cost Rs 2 crore after 10 years.

Riya’s courageous move not only echoes the wisdom of Bollywood protagonists but also sets the stage for a financially triumphant tale. 

Taking a Loan vs Investing in Mutual Funds

Preparing in advance and investing in mutual funds for buying a home is often a smarter choice than taking a loan. Here’s why:

1. Building Wealth: When you invest in mutual funds, your money has the potential to grow significantly over time. This means you can save up a substantial amount, which can help you buy your home without needing a big loan.
2. Less Debt: By saving and investing, you can reduce or even eliminate the need for a hefty mortgage. This means no stressful monthly payments or the worry of carrying a large debt.
3. Saving on Interest: Mortgages come with interest rates that can add up to a lot over the years. By saving in advance, you avoid these extra costs, making your home purchase much more affordable in the long run.
4. Financial Security: Investing in mutual funds helps you build a diversified financial portfolio, providing a safety net. Taking a loan ties up your finances and can be risky if your income situation changes unexpectedly.
5. Freedom and Flexibility: Having your own savings gives you more control. You’re not tied to a mortgage lender’s terms, and you can make financial decisions that best suit your situation without the constraints of loan requirements. You can also plan for your retirement and other financial objectives alongside.

In a nutshell, preparing in advance and investing in mutual funds helps you build the financial strength and flexibility needed to buy a home, without the stress and extra costs that come with taking on debt.

Mutual Funds that can Come in Handy for Buying Home

(Data as of April 2024)

1. Axis BlueChip Fund 

Fund Size: Rs. 33,171.04 crore 

Expense Ratio: 1.575 

Investment Details: The fund allocates 97.44% of its investments to domestic equities, with 73.79% in large-cap stocks and 5.34% in mid-cap stocks. 

Suitable for: Investors seeking to invest for at least 3–4 years with an appetite for potential moderate losses in pursuit of high returns.

Fund Managers: 

Shreyash Devalkar-  

• Senior Fund Manager at Axis AMC. 
• Joined in 2016, overseeing key funds like Bluechip, Midcap, and Multicap since 2017. 
• Prior role at BNP Paribas AMC as Fund Manager for over 5 years. 
• Analytical Background: Former Research Analyst at IDFC Asset Management Company (July 2008 to Jan 2011) and IDFC Securities (September 2005 to July 2008). 

Ashish Naik- 

• Equity Fund Manager at Axis AMC. 
• Joined as a Research Analyst in 2009, promoted to Fund Manager in June 2016. 
• Previously associated with Goldman Sachs India Securities as a Business Analyst. 

2. Mirae Asset Large Cap Fund 

Fund Size: Rs. 37,969.17 crore 

Expense Ratio: 1.53% 

Large Cap Focus: The fund holds a portfolio of 65.43% allocation in Large Caps, 7.06% in Mid Cap, 3.07% in Small Caps 

Suitable For: Long-term investors seeking high returns (3–4 years) 

Fund Manager: 

Gaurav Khandelval- Mr. Khandelwal is a CA and CFA . Prior to joining Mirae Asset Investment Managers (India), he has worked with Edelweiss Securities Ltd., Ambit Capital Private Limited, Emkay Global Private Limited, CRISIL Limited and ICICI Bank. 

Gaurav Mishra-  

• Experience: Over 23 years in investment management and equity research. 
• Previous Role: Senior Portfolio Manager at ASK Investment Managers Limited. 

3. Parag Parikh Long-Term Equity Fund 

Fund Size: ₹52,007.02 Cr 

Expense Ratio: 0.6% 

Risk: Very high. 

Investment Details: The fund seek long-term capital growth by investing predominantly in a diversified portfolio of equity and equity-related securities. The fund also invests a portion of its assets in foreign equities.

Suitable For: Investors with a 3–4 year horizon seeking high returns. Willingness to bear moderate losses. 

Fund Manager:

Raj Mehta-  

• Commerce Graduate, CFA Charter Holder. 
• Started as a PPFAS Mutual Fund intern in 2012, now part of the Fund Management team. 

Rajeev Thakkar-  

• CA, Cost Accountant, CFA, CFP 
• Linked with PPFAS AMC since 2013. 

Rukun Taranchandani- 

• BTech (IT), PGPM (Finance), CFA, CQF 
• Worked with Kotak MF, Goldman Sachs, and Unnati Investment before PPFAS. 

Mansi Karia- 

• BCom, MS Finance, CFA 
• Previous roles at Insync and Zacks Investment Research 

4. UTI Flexi Cap Fund 

Fund Size: Rs. 26,424.14 crore 

Expense Ratio: 1.64% 

Fund Description: The fund aims to provide long-term capital appreciation by investing in a diversified portfolio of equity and equity-related securities across various market capitalizations

Suitable For:  

• Investors with a 3-4 year horizon seeking high returns. 
• Preparedness for moderate losses. 

Fund Manager:  

Ajay Tyagi- 

• Joined UTI AMC in 2000. 
• Transitioned to Equity Research and Fund Management functions, presently serving as a Fund Manager in the Equity Fund Management Team. 
• Serves as an Investment Advisor to select India-dedicated offshore funds. 
• Started as an Assistant Fund Manager in the Offshore Funds division before being designated as a Fund Manager. 

5. Axis Mid Cap Fund 

Fund Size: Rs. 24,563.59 crore 

Expense Ratio: 1.61% 

Fund Description: Axis Mid Cap Fund is an equity mutual fund focused on long-term capital growth by investing primarily in mid-cap stocks.

Suitable For:  

• Investors with a 3–4-year horizon seeking high returns. 
• Preparedness for moderate losses. 

Fund Manager: 

Shreyash Devalkar-  

• Senior Fund Manager at Axis AMC. 
• Joined in 2016, overseeing key funds like Bluechip, Midcap, and Multicap since 2017. 
• Prior role at BNP Paribas AMC as Fund Manager for over 5 years. 
• Analytical Background: Former Research Analyst at IDFC Asset Management Company (July 2008 to Jan 2011) and IDFC Securities (September 2005 to July 2008). 

Nitin Arora- 

• M.Sc. in Finance and Investments. 

• Associated with Axis Mutual Fund. 
• Worked with Aviva Life Insurance Company India Ltd. 
• Contributed to Emkay Global Financial Services Ltd. 
• Engaged with Nirmal Bang Institutional Equities Ltd. 
• Associated with Bloomberg UTV Ltd. 

Concluding the talk 

As the credits roll on this cinematic journey, the essence of Bollywood’s timeless tales becomes evident. Budgeting for your dream home isn’t just about numbers; it’s about crafting a script that considers all costs, accounting for the inflationary twists of the real estate plot. Don’t settle for a minimum down payment–script a financial saga with a robust mutual fund investment, paving the red carpet to your dream home. This isn’t just a story; it’s a celebration—with Bollywood beats, dreams coming true, and every financial choice taking a bow.

Let’s embark on this dream home party–Bollywood style—where every investment is a blockbuster moment! 

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