The Meswanis live in a rented three-bedroom DDA apartment in Saket for which they pay a monthly rent of Rs 18,000. Their landlord issues one rent receipt to Rohit for Rs 12,000 and the other to Pallavi for Rs 6,000. Their cost-to-company earnings are Rs 30,000 pm and Rs 15,000 pm respectively.

Their salaries have been structured to maximise their tax benefits and while Pallavi is totally tax-exempt, Rohit pays income tax aggregating to Rs 25,314 after availing of a rebate of Rs 6,540 under Section 88 of the IT Act.

Their annual perquisites comprise LTA and medical reimbursement (Rs 31,000 for Rohit and Rs 15,000 for Pallavi). Their gross salaries (excluding employers contribution to PF, medical and LTA) are Rs 25,820 and Rs 13,000 respectively. Their combined take home-pay as shown in table (Cash Down) is Rs 14,610.

Realising that the monthly house rent of Rs 18,000 constitutes the single-largest drain on their income, the couple wish to urgently convert this outflow into an asset by acquiring a home of their own. They have had preliminary discussions with ICICI and have been given to understand that their joint salaries will not be able to support an EMI in excess of Rs 16,400 per month. They have also been informed that if they opt for a 20-year loan (EMI Rs 1,204/ lakh) then they would be able to borrow Rs 13.6 lakh provided they meet at least 15 per cent of the property cost. However, if the loan term is 15 years then the EMI will be Rs 1,306 per lakh rupees and the borrowing limit shall stand reduced to Rs 12.55 lakh.

Rohit and Pallavi have also individually made inquiries with their employers to determine their maximum resource mop-up capacities and have been informed as follows. Rohit can avail of Rs 96,000 as interest-free basic salary advance from his employer, which is repayable in 24 installments. In addition, Pallavi could also get house-buying assistance limited to Rs 1 lakh, repayable in 25 installments of Rs 4,000 each.

Loan from provident fund account at 50 per cent of outstanding balance at the close of previous financial year would fetch them Rs 1,34,000 and Rs 60,000 approximately. Premature sale of ULIP Units of UTI gets an additional Rs 60,000 and Rs 40,000 respectively. Surrender value of Rs 2 lakh LIC policy with a 25-year span which has been running for 12 years will be Rs 1.5 lakh. Added to these are personal savings of Rs 1 lakh and Rs 50,000 respectively along with loans from parents, friend and relations totalling Rs 1,10,000 and Rs 50,000. Their total resources add up to Rs 6.5 lakh and Rs 3 lakh.

This means that they must limit the purchase of their home to Rs 23 lakh including registration charges. The couple wish to restrict their search to south and south-west Delhi, which limits their choice to Vasant Kunj and Dwarka. They have zeroed down on a three-bedroom unit measuring about 1,300 sq ft in Dwarka at a cost of about Rs 13-14 lakh.

Alternatively, they have also been offered two back-to-back two-bedroom apartments, which the society is prepared to separately allot to Rohit and Pallavi. By undertaking internal modification they will be able to convert this area into a large 3 or 4 bedroom unit with a covered 2,100 sq ft area at a cost of Rs 21 lakh. This building would be ready for possession in about four months. The best part is that no further registration charges are payable because the land already stands registered in the name of the society and its impact is included in the cost of the apartment itself.

Although the proposition seems interesting they are not happy about having to borrow from ICICI at 13.25 per cent interest (annual rest) and the fact that they will virtually have to use all their resources to finance this deal. So, they surveyed various housing finance companies (HFCs) to find out if there are any better offers and after a detailed analysis figured out that DCHFC (Delhi Cooperative Housing Finance Corporation) was the best offer for them. One of the major reasons for opting for DCHFC is that it insists on no margin money and offers up to 100 per cent of the property value even though at 13.5 per cent fixed interest rate (monthly rest), it is slightly more expensive than the 13 per cent that some other housing finance companies HFCs charge.

What is even better is that it does not levy any processing fee or administration charge. Also, it carries no prepayment charge. Consequently, their EMIs work out to Rs 1,290 and 1,282 for loan tenures of 15 and 20 years respectively.

As increments for the couple are decided at year-end and are applicable from April 01 in the following year, they have been advised that while Rohit can expect an increase of Rs 50,000, Pallavi's increment would lead to a raise of Rs 36,000. They have also discussed restructuring of their salaries with their respective companies, taking into consideration their requirements to service a housing loans of Rs 10 lakh and Rs 7.68 lakh from DCHFC. Table (Revamped Earnings) given above works out their revised salary structure.

Having secured a written confirmation of their revised salary structure, the couple approached the DCHFC for principal loan approval. They were informed that they would be able to extend a 20-year loan to both of them for the purchase of two-bedroom apartments. Rohit's EMI for Rs 10 lakh loan will be 12,070 pm. Vaishali's loan, however, will be restricted to Rs 7,68,000 which would entail an EMI of Rs 9,270.

This means that the couple must find approximately Rs 3.50-Rs 4 lakh from their own resources to meet the cost of both the apartments and minimal modification expenses. After great deal of deliberation Rohit and Pallavi have decided to secure interest-free housing loans of Rs 1.2 lakh and Rs 1 lakh from their respective companies and also utilise their personal savings of Rs 1.5 lakh. Any shortfall thereafter would be met by raising short term-loans from their parents, relations and friends. This way, they will leave their respective PF accounts, ULIP Units and Rohit's LIC policy intact. Rohit will rent Vaishali's apartment and pay her 13 months advance rent-Rs 1,36,500. He will also foot initial renovation expenses. Although he will not be required to pay any rent to her during the first year the advance rent paid and received will be taken into consideration for tax accounting purposes.

Thus their respective income tax liabilities would appear to be as per table (Tax Accounting). Take-home salaries during the first loan year after deductions on account of company home loan, employees contribution to PF exclusive of medical expense reimbursement available to them would be as follows.

Rohit: Rs 32,920 - 19,377 (EPF 2,000+EMI 12,070+housing loan repayment 5,000+income tax 307)= Rs 13,543 pm.

Vaishali: Rs 17,000 - 14,835 (EPF 1,000+EMI 9,270+housing loan repayment 4,000+income tax 565) = Rs 2,165 pm.

This would in effect mean that their take-home pay would in fact marginally improve from Rs 14,610 at present to Rs 15,708. They could now start long-term investments to secure their children's and personal future.