What are the best investment options for your future home's down payment?

Planning to buy a house in 10-15 years and estimating the cost to be around Rs 2.5 to 3 crore. Is a combination of Tata Small Cap or Edelweiss Small Cap and Mirae Asset Midcap Fund or PGIM India Midcap Fund a good combination of funds over such a long period to generate the maximum possible amount for the down payment? - Aditya B

If you're already planning to buy a house 10-15 years from now, you're on the right track. You have ample time to let your investments grow, which is essential to expect a reasonable rate of return on equity funds and accumulate the necessary corpus for the down payment.

However, keep in mind that if the house's cost you're targeting is in today's value, you need to account for real estate inflation to determine the amount you should aim for. This will help you calculate the required SIP amount for the down payment.

After that, you can begin your SIP in two to three flexi-cap funds, which should form the core of your portfolio. You may add one-two mid and small-cap funds for a supplementary allocation of no more than 25-30 per cent of your portfolio. The composition of your portfolio may vary depending on your risk appetite and previous experience of investing in equity funds.

What if you're undecided?
For those who haven't decided yet, buying a house is a significant financial decision that should be carefully considered. In most cases, it's justifiable to borrow money to buy a house if you plan to live in it. Home loans offer tax breaks, and it's a long-term debt. However, ensure that you won't pay more than a third of your income by way of EMI by making an adequate down payment.

On the other hand, it may not be a good idea to view a house as an investment. Real estate has poor liquidity, as it's not easy to buy or sell a house at will. Investing in a house involves a big-ticket size, making it undiversified, and if you need the money, you'll have to sell it at one go. Moreover, the high value of a house can limit your ability to sell it, further complicating things.

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