Should I renovate our old family flat or take a home loan for a new house?

I'm 27 years old, unmarried, and currently earning around Rs 1.4 lakh per month. In the last couple of months, I’ve just stepped into this salary bracket, and I’m trying to plan my finances wisely.

Here’s a snapshot of my financial situation:

Rs 5 lakh invested in mutual funds

Rs 1 lakh in liquid cash

Health insurance in place for myself and my parents (separate from my employer’s coverage)

A car loan of Rs 12 lakh, for which I pay Rs 25,000 EMI per month

Now, my parents are encouraging me to buy a new property via a home loan. The reason? Our existing flat in Bhubaneswar—fully paid off by my father—is quite old, cramped, and no longer ideal for hosting guests. I’ve seen my father compromise and adjust when guests stay over, and I can tell it bothers him.

I’m weighing two options:

🏚️ Option 1: Renovate the Existing Flat

Estimated cost: ₹10 lakh

Includes repairs, basic interiors, and furnishing

Would improve liveability but the flat remains small

🏠 Option 2: Buy a New Property (My Dad’s Preference)

Take a SBI Realty Loan of ₹65 lakh

Use ₹20 lakh to buy a plot

Use the rest to build a house on it

Here’s where I’m stuck: I’m not sure if I’ll stay in Bhubaneswar long-term. I might move cities or even countries for work in the next few years. Taking on a major home loan right now—with a car loan already running—feels risky. On the other hand, I want to give my parents a better home, and having a proper house might also matter when I eventually get married.

What’s the sound financially move here? Should I wait, renovate, or go ahead with buying new property despite the uncertainties?

Advice by Animesh Hardia, Senior Vice President, Quantitative Research at 1 Finance

Here’s a clear, practical framework to help you decide between renovating your old family flat or taking a home loan for a new house:

Option 1: Renovate the Existing Flat (Rs 10 lakh)

Pros:

· Lower upfront cost-keeps your finances light and flexible

· No new debt, so your monthly outgo remains manageable

· Improves comfort and aesthetics for your family

· Retains ownership of a fully paid asset

Cons:

· Space constraints remain; the flat may still feel cramped

· Renovation might not add much to resale value

· May not fully satisfy your parents’ or future needs

· Risk of unforeseen repair costs

Option 2: Buy a New Property with a Home Loan (Rs 65 lakh loan)

Pros:

· Opportunity to build a spacious, modern home.

· Potential for higher asset value and better living standards.

· Fulfils your parents’ wish for a better home and suits future family plans

· Real estate can be a solid long-term investment-if you stay put

Cons:

· Large loan means higher monthly EMIs and long-term financial commitment

· Existing car loan plus a home loan increases your debt burden

· Uncertain future location adds risk-what if you relocate?

· Ties up liquidity and reduces financial flexibility

Key Decision Factors

Ask yourself these questions:

· How likely is it that you’ll stay in Bhubaneswar for at least the next 7-10 years?

· Are you comfortable with a high EMI burden, especially with a car loan already running?

· Is your family’s comfort and space an urgent priority, or can it wait a few years?

· Are you buying for living, or as a long-term investment? If the latter, can you commit to holding the property for 10+ years?

· Would tying up funds in property restrict your ability to move, invest, or handle emergencies?

Practical Suggestions

· If your future in Bhubaneswar is uncertain, renovating is the safer, more flexible choice.

· If you’re confident about settling down soon, buying new could be worthwhile.

· Consider a phased approach: renovate now, revisit the idea of buying when your plans are clearer.

· Always keep an emergency fund ready to handle all your financial commitments.