Loading...

From the Managing Editor

You are likely to have more real estate transactions than a generation before did. And that's why you need to understand what reinvesting in your house is all about and how it affects your home equity.

Rohit Saran | Print Edition: Nov 29, 2007

The expression “home sweet home” is beginning to sound truer than ever. From being a shelter for your family, home can now also be a source of funding for everything from a family vacation to children’s education to postretirement income (through reverse mortgage).

This means that your house is not only the biggest asset you have, it is also one of the biggest asset creators you can have. All you need is to be aware of the concept of “home equity” — or the economic value of your house.

Home equity isn’t just the current market value of your house. Besides, the market price of your home is itself beginning to be influenced by factors other than the location and size. The best way to understand this is to ask yourself: how different would be the type of house you buy today from the one you would have bought five years ago? From kitchen to bathroom to wardrobe space and from flooring to woodwork to electrical fittings, Indian homes are undergoing a rapid transformation. For instance, unlike a few years ago, having a designated computer area (which can double as a home office) is essential in most houses today.

Very soon the homes will need to be wi-fi friendly if not wi-fi enabled. Keeping up with this transformation is key to retain and enhance the value of your house — be it for sale, renting or even for self-occupation. Our cover story proves this new home truth conclusively.

Sure, the rising tide of real estate prices has lifted the value of every property, no matter whether the owner has re-invested in it or not. But buyers and brokers are unanimous that an “improved” house will always command a premium, especially when the rate of growth in realty prices begins to slacken.

Keep in mind another factor. You have probably bought a house earlier in your life than your parents had. That means you are likely to buy another house in your life time, either as an investment or as an upgrade to your first home. Whatever may be the reason, you are likely to have more real estate transactions than a generation before did. And that’s why you need to understand what reinvesting in your house is all about and how it affects your home equity.

Just a word of caution: be careful in striking the right balance between home improvement “investments” and home improvement “luxuries”. In the years to come, smart, not large, and planned, not palatial, houses will be in greater demand. As with your finance, so with your house, it’s how, and not how much, you invest that is beginning to matter more.

  • Print
  • COMMENT
BT-Story-Page-B.gif
A    A   A
close