The social media is abuzz with a heated debate that has been raging for the past few weeks around the decision whether to buy a house or rent it. As they say there is always more than what meets the eye, buying a house also is also not as black and white as what one may perceive.
Owning a house comes with a number of hidden costs that come in different forms and shapes such as maintenance expenses, stamp duty, brokerage, and then this huge investment is usually illiquid and raising money from it even when you need it urgently may not be easy.
There is no denying the fact that owing a prized possession i.e., a house offers a slew of tangible and intangible benefits. At the outset, after buying a house at a young age, one can start investing early and as we know: the magic of compounding requires investors to start investing early to be able to accumulate wealth in the long run.
On the top of it, appreciation in real estate also adds to the investor’s wealth over a long period of time. And not to mention that house ownership, when bought on home loan, gives tax incentive. “Homeownership also comes with tax benefits, including deductions for mortgage interest and property taxes. Forced savings through mortgage payments can also help young homeowners develop responsible financial habits,” says Atul Monga, CEO and Co-Founder of Basic Home Loan.
It’s not about money alone!
Buying a house is surely about having an adequate amount of money, but it is not about money alone. A lot of people want to buy a fixed asset for a slew of non-financial reasons such as a sense of pride, social status, respect among family and friends, and importantly for emotional satisfaction.
Mr Monga from Basic Home Loan believes that owning a home provides a sense of security and stability while also allowing for personal expression and pride of ownership.
“Home purchase is not only financial decision but it is also an emotional decision So it is very personalised as subjective to individual,” says Preeti Zende, a Sebi-registered financial advisor and Founder of Apna Dhan Financial Services.
The house you call home
As Indians, we are all aware that there is a thin line that separates a house from a home. If you buy a house as a residential abode, then you don’t see it as a mere investment. It is a place that binds the family, located preferably close to your kin and where child’s school and bread winner’s officer are easily accessible, among several other factors.
So, there is no one-size-fits-all answer whether one should buy a house or simply rent it. “For most of us, owning a home is an emotional decision. Almost always we end up stretching the budget and a large home loan to buy the best location and amenities that one can afford. If you are buying to live in the home, then don’t evaluate it as an investment,” says Gaurav Rastogi, founder and CEO, Kuvera.in.
When you buy it as an investment
Experts advise that buying a house as an investment is beneficial only when you consider a slew of factors. These relate not only to the macro situation of economy but also relate specifically to the property.
The generic factors relate to the financial situation, housing market, interest rate scenario and tax benefits available.
“The more micro factors that investors must focus on include whether this is a distress sale, whether the price is lower than that of properties in the neighbourhood and whether the price is likely to go up because of a new airport planned or metro station planned,” Gaurav Rastogi, founder and CEO, Kuvera.in.
But if you are young and ready to move around whenever you get a good job opportunity then in that case renting can be a good idea as it can make you flexible. Secondly when you do not commit to a big EMI unnecessarily you can focus on building financial assets for your other mandatory goals.
In conclusion, we can say that this dilemma does not have an easy or one straight answer and it varies from person to person, and from situation to situation. When a young professional has a high disposable income, then it is not totally unreasonable to buy a house in their 20s because this would leave him/her with enough time to focus on other financial goals such as saving for retirement.
