Rent or buy..another myth busting..
If you have followed my posts regularly you would have seen my posting regarding owning or renting your house..to which I have received violent protests. Here I am replying to the protests…
“Own houses can be bigger than rented ones.”
That is funny. You can rent a bigger apartment can you not? Most renters live in single-family houses. I prefer a 2 bedroom hall kitchen apartment for now. I like not having to fill it with stuff. I like using a fifth of the energy of the average person. I like being 10 minutes from work and (this is unique to Navi Mumbai) not having gone to office EVER in a car in almost all my working life. I am frugal. The current book I am reading is “Enough” by John Bogle, one of my all time favorites is “To have or to be” by Erich Fromm. I spend a teacher’s salary each year on restaurants and travel. But I guess I’m too busy or lazy right now to bother with a big ‘own’ house and society meetings.
“Should I sell my big house and rent a small flat instead?”
No heavens sake no. No, unless you have more space than you need. If you have fallen for “you buy a house only once, so buy big” call by your broker, then think again. Do not move if it will disrupt your family. If your spouse, kids, and others have got used to a neighborhood do not move. I am frankly not here to convert people to my line of thinking. It is not in my interest either. I want you to consume more cement (I own shares of Grasim and Ultratech), more steel (Tata Steel), travel longer to your place of work (Tata Motors), borrow money to buy a bigger house (Hdfc) – and smoke (ITC) to relieve your stress. As long as my dividends are greater than the rents that I pay I am personally happy!
Completely from another point of view this “I should own a house” – it is an Indian dream (you can say American, Japanese, ….anything you want to say) keeps house prices high – and rentals low. I benefit by the later.
Hitesh
I completely buy this principle I have just done this analysis long time back When I had strong Urge or PEER Pressure to buy an home
I assume If I take 30Lakhs loan for 20 years or I rent in a home for 8000 pm/ which goes for 10% escalation every month & 10000 Rs every year if I move or been asked to move every year because of any probable Issues
Even If I consider the Tax benefits of 1.5 lakhs per month
& Invest the difference of EMI-Rent to Equity with a 18% Return on yearly basis -I will have 2.5 Crores extra
& I have not considered the benefits of 5-6 lacs which I have to pay as a downpayment & for Frnishing the house Even If I considered that It will be 4 Crores
& there are endless benefits of having a freedom to move any city , any place , live next to Office , enjoy the spare time which is priceless
so end is good & the money I saved & earned form that will be used to buy some cottage in Hill Stations:)this is a wishlist
Pooja Chopra
I am totally puzzled after reading this blog. What do I do with the thoughts of building “MY DREAM HOME” (which is currently under construction) – the one forever! I think if it’s your home, you can add to it, redo it, do whatever you want……!!!But I am a lil confused (after going through those calculations)…..with no specific answers at the end….as always!;)
Narasimhan C.S.
You are trying to prove the stupidity of buying a house through sheer arithmatic calculations! However arirthmatic calculation is not everything in life. We all take insuranc policies and mentally write off that expense. Why? Beacuse there is a price to be paid for the psychological feeling of security. I use the word ‘psychological’ here because there is nothing like absolute security in life.
You may wonder what has insurance to do with owning a house. When you own a house you are insuring yourself against several pitfalls.You do not have to go through the torture of relocating every now and then. Housewives particularly hate to do this because very often they have to bear the brunt of taking care of several small little things(and even major issues of moving like packing,repackinfg etc) and also readjusting to new surroundings,updating change of address and telephone nos to one and all etc. Add to this the problems one has to face with whims and fancies of the landlords. I do not have to eloborate this except to say that I have heard several horror stories (in Chennai) of how landlords behave. And of course,as one of the readers pointed out,the joy of doing and redoing the decor of our home and gardening(if one happens to own an independent house)withour the fear of being questioned by the landlord is something immeasurable. Things such as these can not be quantified by money! These arguments are especially relevant for people who are retired or close to retirement or self employed individuals because their “coordinates” are more or less fixed.