Indians place a lot of value on home ownership. People in Calcutta are right up there when it comes to home ownership aspirations, the 2021 BankBazaar Aspiration Index has revealed. However, the survey also reveals the above-average difficulties residents of the city face in fulfilling this aspiration. What are those difficulties? How can they be overcome?

The survey

The aspiration index is an annual survey of India’s aspirations seen through the lens of personal finance. It asks pan-India respondents aged 22-45, who have an income of Rs 30,000 or more and who’ve done at least one digital transaction recently, questions about their goals.

The aspirations — health, wealth, relationship, fame, and personal growth — subsume 21 financial or non-financial goals such as savings and investing for children, home ownership, or eating a nutritious diet. Three questions are asked about each goal: how important the goal is to you, how confident are you of achieving it, and what your current preparedness for it is.

What Calcutta said

In 2021, Calcutta’s aspirations are along the lines of India’s broader aspirations. Pan-India, the three most important goals are investing and saving for children’s education, to have long-lasting friendships, and home ownership. The same applied to the respondents in Calcutta. However, the data from Calcutta suggests home ownership is more difficult here compared with the rest of India.

The readiness gap

Home ownership scored 91.4 on importance for the people of Calcutta.

On confidence about fulfilment, Calcutta scored 88.6. But for current preparedness, Calcutta scored a much lower 81.0.

The average preparedness score for the home ownership goal is 84.4 in metros and 87.1 in non-metros. For Calcutta, there’s a very large gap of 10.4 points between the importance of an aspiration and its preparedness. The all-India readiness gap for home ownership was a much lower 6.4.

The average readiness gap for all 21 goals was 4.3 compared with a much better 3.2 for Calcutta. This suggests Calcutta is perceived to be fulfilling its aspirations more easily than other cities, except when it comes to wealth goals such as home ownership. In fact, for Calcutta, of the five goals where the readiness gap was the largest, there were three wealth goals: saving for early retirement and travelling around the globe being the other two.

Roadblocks to wealth goals

The respondents were presented with a set of roadblocks between them and their aspirations. Of these, Calcutta ranked the highest on two roadblocks.

A massive 52 per cent from the city said they were constrained by high costs of living. Twenty two per cent said they had difficulties in getting loans and credit cards. Further, 41 per cent pointed at limited savings, and another 36 per cent said their current health issues posed problems. Calcutta fared much better than the other cities on the following financial roadblocks: limited savings (41 per cent), family responsibilities (49 per cent) and insufficient salary (31 per cent).

Solving the challenges

To a large extent, Calcutta’s financial challenges are also the challenges faced by other cities. However, in the above analysis, a dichotomy emerges: that of limited savings despite sufficient income. Increasing savings while balancing other commitments will hopefully lead to home ownership. A typical home will require anywhere between 20 per cent and 40 per cent of self-contribution. Aggressive savings will help raise this capital.

Access to credit

We are in a time where credit is easily available though there are barriers to credit access. For the salaried with credit scores over 750, no borrowing option is off limit. In fact, the lowest interest rates and most attractive loan offers are reserved for those with scores above 750. On the other hand, those with lower credit and income profiles will struggle getting the same offers and may have to pay much higher interest on their borrowings. Therefore, taking control of one’s home loan eligibility is critical.

First, one’s credit score needs to be strong. This is directly in the borrower’s control. Disciplined, judicious use of small credit can easily lead to a score of 750 over time, allowing you to borrow big for your home. Second, women are given preferential rates on home loans. Having a female co-borrower in your home purchase can, therefore, help.

Start small

Your first home need not be the home of your dreams. You could start small. When finances permit, you may upgrade to a better option. A smaller home, or at least one on a small budget, would be easier on your finances. It is also easier to get a higher loan-to-value on smaller properties, with some banks prepared to finance as much as 90 per cent of the cost compared with only 75 per cent on costlier properties. A smaller loan is also easier to pay off as your income increases with time while your EMIs remain constant.

Avoid financial accidents

Do not let the vagaries of life disturb the pursuit of your aspiration. Over a third of Calcutta’s respondents reported health-related financial challenges. A pandemic has the propensity to hurt your whole family, leaving you with very large expenses. The best way to control these expenses would be by buying a robust health insurance policy. It would ensure that the pursuit of your aspiration isn’t harmed and you don’t have to part with your precious savings in an emergency.

The writer is CEO, BankBazaar.com