Buying a house? Know the mutual funds that help you

Investments in mutual fund SIPs have helped many people to buy their dream homes, despite the high prices.
Investments in mutual fund SIPs have helped many people to buy their dream homes, despite the high prices.


  • A systematic investment plan in the right funds can grow your portfolio by leaps and bounds

Mumbai: Owning a house is a lifelong ambition for many. But real estate is extremely expensive—the reason why most investors consider it a major financial goal. While most people dip into their savings and opt for housing loans to make their dream a reality, a few make upfront payments by redeeming their investments—built over the years via systematic investment plans (SIPs) in mutual funds (MFs).

That is how Ravi Kokate, a supply chain officer with e-commerce firm Amazon, was able to buy an under-construction 2BHK (two-bedroom) flat in Navi Mumbai recently. He started by investing 500 in mutual funds every month in 2008 and gradually topped up the amount over the years. In August, he redeemed 61 lakh from his MF portfolio to fund his dream house.

Kokate benefited from being an early saver. So did Dhinesh Potnuru, a product manager with a fintech firm based in Bengaluru. Soon after he found a job after getting his master’s in business administration in 2016, Potnuru started on his SIP journey and invested 20,000 every month. Even the extra income that he earned after switching jobs also went into the SIPs. Although he had to redeem around 3 lakh for his wedding in 2018, he had accumulated enough savings by 2021 to finalize the purchase of a 3BHK under-construction flat in Bangalore. He got possession of the house in May.

Potnuru, who took a loan of 1.1 crore, made a down-payment of 22 lakh. Of this, 16 lakh came from MF investments—45% of his portfolio.

Nithen Kanagara, a business development officer with a cable firm in Chennai, had a different story to relate about his housing journey. Despite starting his career with a lower salary, Kanagara began investing 2,000 per month in 2017. His father retired from a government job in 2019 and bought a plot of land in Oragadam, on the outskirts of Chennai, with his retirement proceeds. Kanagara took a loan of 45 lakh to construct a house on the plot gifted by his father. He also spent 10 lakh from his MF portfolio for the construction work.

Kokate, Potnuru and Kanagara are among those who understood early on the significance of MF investments and its power of compounding. But, what funds did they invest in to make their dreams come true?

The choice of funds

(Graphic: Mint)
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(Graphic: Mint)

Kokate started dabbling in the stock market in 2008 when he had just started earning. That did not go too well and instead taught him to be conservative with his money and save for unforeseen events. “It helped that I graduated during the Lehman crisis when jobs were scarce," said Kokate. “It taught me to be frugal and invest as much as I could."

“An acquaintance suggested that I read up on personal finance and that was how I came across mutual funds," said Kokate. He began to invest in funds that were featured in personal finance magazines or TV shows. By 2013, he had accumulated enough savings to book a small under-construction 1BHK apartment. For that, he redeemed his entire mutual funds.

Unfortunately, the builder got mired in some controversies and Kokate never got the occupancy papers for the apartment. He started investing afresh in SIPs from 2013 and, within five years, was ready to make the down-payment on another house, a 1 BHK flat in Navi Mumbai. Again, he redeemed all his MFs. In 2018 he started investing again, albeit with a smaller amount sinc he now had a housing loan to repay. But by 2023, he was ready to buy a bigger house.

Kokate was a do-it-yourself (DIY) investor for the longest time. It was not until 2021 that he sought the help of a certified financial planner.

Kokate is unable to recall all the funds that he invested in over the years. However, in 2018, a major part of his SIPs was dedicated to PPFAS Flexi Cap Fund, UTI Nifty 50 Index Fund, PGIM Midcap Fund, and Axis Small Cap Fund. Around 2021, his investment advisor also recommended investing in Quant’s large and mid-cap fund, its small-cap fund, and Mirae asset emerging bluechip fund. (See graphic)

“It took me 10 years to figure out that I shouldn’t choose funds based on past returns. Earlier, I used to check out the performance of the last 2-3 years and invest in the good ones," said Kokate

Potnuru, who stays in a rented house in Bengaluru currently, is also largely a DIY investor though he sometimes takes advice on investing from a friend who was his college senior. They would mostly discuss funds that were doing well but Potnuru also did some bit of research on the side. He redeemed about 10 lakh from the PPFAS Flexi Cap Fund and 6 lakh from Axis Bluechip Fund for the down-payment of his house. The rest came from his savings bank account.

Kanagara used to check MF data regularly on the Crisil website and browse through newspaper articles on fund performance. He started off with an SIP of 2,000 but now ploughs in around 20,000 per month although he has kept his SIPs on hold for the past six months to pay the equated monthly instalments of his housing loan. He took out around 10 lakh ( 6 lakh from Mirae Asset Blue-Chip Fund, 3 lakh from Axis Flexicap Fund and 80,000 from ICICI Prudential Balanced Fund) to fund the construction of his house.

Potnuru, too, had kept his SIP on hold for a while after he made the down payment for his new house in March 2021. He has since started investing 35,000 every month, as against 50,000 previously. He expects the rent burden to go away when he moves into the new house and thereafter increase his investments.

As for Kokate, he did not want to have any debt burden and paid the full amount for his third house. His builder also offered a discount if he made the full payment upfront. Kokate has again started investing in the PPFAS flexi cap fund since last month. He says that he likes PPFAS because it has an allocation to foreign companies.

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