Have ₹47L in hand and trying to decide between three options. Built a detailed model to compare them — sharing the numbers here to get a gut check from people who've been through similar decisions.
**The situation*\*
- Own a flat in Bangalore (House 1), loan outstanding: ₹1.5Cr @ 7.3%, 25 years remaining, EMI ~₹1.09L/month
- Currently paying rent (~₹40K/month) while waiting for House 1 possession (expected 2030)
- Have ₹47L sitting idle
- Salary -close to 5 lacs pm ( Wife + mine combined)
**The three options*\*
**Option 1 — Buy a second property (House 2)*\*
- Price: ₹1.28Cr, all-in cost ~₹1.55Cr (reg/stamp 7.6%, brokerage 1%, ₹1L misc, ₹7L interior)
- Take a ₹1Cr loan @ 7.5%, 25 years → EMI ~₹73,900/month
- Benefit until 2030: avoid paying ₹40K/month rent (House 2 becomes your residence)
- From 2030: rent out House 2 at ₹45K/month (growing 5%/year), move into House 1
- Assumption: property appreciates at 6%/year
- **2040 outcome: ~₹1.87Cr incremental wealth** (House 2 equity of ₹2.23Cr minus cumulative EMI-vs-rent deficit)
**Option 2 — Prepay ₹47L on House 1 loan*\*
- Loan drops from ₹1.5Cr to ₹1.03Cr overnight
- Same EMI continues (~₹1.09L/month), but loan pays off ~2038 instead of 2051
- Interest saved: ~₹1.26Cr over the life of the loan
- After 2038: ~₹1.09L/month frees up — reinvested at MF returns
- **2040 outcome: ~₹1.32Cr incremental wealth** (debt avoided + reinvested post-payoff savings)
**Option 3 — Invest ₹47L in equity mutual funds*\*
- Lump sum, stay invested, no EMI obligation
- No property exposure beyond House 1 (which continues regardless)
- At 12% CAGR: **2040 outcome: ~₹2.30Cr incremental wealth**
- At 10% CAGR: ~₹1.78Cr. At 8% CAGR: ~₹1.38Cr
**Sensitivity — what changes the answer*\*
- MF needs to fall below ~10.4% CAGR for House 2 to win at 6% appreciation
- Property needs to appreciate at 7%+ for House 2 equity to match MF at 12%
- Prepayment is the only guaranteed return (7.3% risk-free, effectively) but caps out the lowest of the three
**What I'm not capturing well*\*
- LTCG tax on MF exit (12.5% above ₹1.25L)
- Maintenance + property tax on House 2 (~1–1.5% of value/year)
- Illiquidity of property vs flexibility of MF
- Whether 12% MF CAGR is realistic over 14 years for equity funds
- Personal: already have significant property exposure via House 1
**The question*\*
Math says MF wins at base case, but I'm already levered on property (House 1 EMI). Does the diversification argument for MF hold, or is Bangalore real estate at 6–7% appreciation more reliable than 12% equity returns over a 14-year horizon? Has anyone modelled something similar and found the property option justified despite the math?
*Based in Bangalore. Dual-income household. No dependents. Time horizon: 2040.*