I have written many pieces on ‘buy or rent real estate’. I have got feedback saying ‘If my father had also bought a flat…I would not have bought’.

That may not be the right argument.

It is a person’s migration from one level of strata to the other one which is marked by ‘buying’ a house. He is under tremendous pressure from his own parents, in laws, friends, Hdfc (as a shareholder collecting the recent 1:5 split, I am happy), his employer (an employee committed to an EMI cannot leave, can he?), …so he buys.

It is easy to have a sense of regret…”Oh, only if my father had bought one more flat…” It was available for Rs. 2 lakhs, now it is Rs. 80 lakhs…..” normally you hear this quite often.

My take is if you must feel s…#$%..ed about your dad not buying something it should be equity shares. Your regret should be…”If my dad had just invested Rs. 10,000 (forget Rs. 200,000 maybe he did not have it in 1980) in Wipro (it would have appreciated to Rs. 300 crores), Ranbaxy, Cipla, Larsen And Toubro, Infosys (1992 listing), Sensex, .literally anything..it would have been worth at least about Rs. 2 crores – apart from the dividend with which one could have paid rent….

So first in life, do not regret.

However if you want to regret, regret big! Regret about your dad not understanding the impact of inflation on fixed income securities. Regret that your dad bought land. Or a bank FD. Or put 70,000 in ppf without fail for the past 20 years. Or 40 years. Regret about the ‘gold’ in which they invested – and the Jewelery that will never be sold immaterial of whether gold is in a bull run, bubble run or a bear run. Do not regret that he did not buy some steel, cement, paint, wood, …these are commodities. Instead if he had bought Tisco, Acc, Asian Paints and Hdfc (btw did you notice that a Rs. 50 lakhs house bought with a Rs. 50 lakhs loan costs Rs. 1.1 crore when you multiply the emi * no. of installments?) So Hdfc is also a good proxy for the home that your dad could have bought.

Luckily whenever a friend / cousin / customer asked me for advise re buying a house I made them buy 100 shares of Hdfc. Those who kept the shares (literally most of them) have about 300-400 shares of Hdfc, and 200 shares of the bank.Β  Not bad considering the interest rates may have been 12-14% p.a. but the share has yielded greater than that…

Ha ha ha….LOL If you get to rent a place @ Rs. 1 Lakh a year, you should buy the place only if it is available at about Rs. 15-17 lakhs according to some researchers in the US. No such no. is available for India…Mumbai is atrociously expensive to buy – it is almost a renter’s paradise in terms of rent: own ratios go. However Mumbai real estate has nothing to do with the kind of income that you can earn @ Mumbai….so read on.


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  1. in simple terms, did you mean that no one should buy house…then how will your favorite HDFC shares appreciate πŸ™‚
    their are fools buying homes on loans and their are few others buying shares of banks issuing loans. Difficult to break/decode the chain.

    btw how to handle mental trauma a man has to face from wife nagging daily to buy own home…especially when in-laws are staying in bungalow … moreover in the same town…ha ha ha

  2. Subra,

    One More time it’s awesome article & had really pleasure of reading it.

    Believe me, Reading your articles only – I came to conclusion that provided any extra cash i WILL have in future (I do not have now!!!) – Will think thrice before investing in Real estate… I literally referred to read your blog to many of my friends, Cousins, Colleagues When they speak something about Real estate.

    But can you throw some light on – Real estate investment as a Business decision. I mean one of my relative is developing a small township in Tier-3/4 city at cost of INR 80 Lac(7-8 Houses) & he is saying that each home is sold at INR 15 Lac(advanced booking is what he is claiming). So It means he is making almost 100% gain in 2 yrs horizon. At such time – It makes me feel so inferior that I am not invested in Real estate!!!

    Your thoughts Please!!!

  3. OMG my communication skills are poor! Raheja, Hiranandani, Mittals have not got rich by staying away from real estate, have they? No. Real estate is a FANTASTIC business if you know how to do it. Many of my friends bought @ Panvel for 2200 about 8-9 months back, now it is north of 3k. On a leveraged deal it is a fantastic profit.

    For those who know how to do it, it is worth buying, holding, renting, then selling. Using it to leverage…and repeating it worth it. For a doctor it makes a LOT of sense to buy the dispensary but rent the house. Clients know your disp, not ur house…so Real estate has its place – you need to know how. A residential property is a huge, huge, huge emotional thing esp for those whose father struggled to buy a house…this feels such a relief.

    And I have said this earlier a house is a good saving asset, but a poor investment asset, that is all. Far better than keeping money in a s b a/c.

  4. heck.. Am I reading this right? INR 10,000 in wipro in 1992.. now worth 300 crores πŸ˜€ πŸ˜€

  5. “INR 10,000 in wipro in 1992.. now worth 300 crores”

    Forget cities many of us (or our parents) don’t know about Equities or reluctant to invest in equities at that time(1992). and who knows about a company called WIPRO (or INFOSYS) at that time. (sorry there’s no cnbc at that time to exaggarate things πŸ™‚ ).

    May be an intelligent guy (if any) invests in equities in 90’s, in real estate upto 2003-05 & again in equities in March 2009 πŸ™‚

  6. Wipro 1980. Forget wipro you needed luck, what about Sensex @ 100 now worth approx 17000?

    If you bought a house in say Ghatkopar you would have paid 1.3 Lakhs, currently worth Rs. 75-80 Lakhs, where as 1.3L in sensex would have been worth 2.21 crores. And Ghatkopar can be replaced by Santacruz…story does not change much.

    Sadly there is no Real Estate Index, so somewhere in India there could be a real estate story better than the sensex, but we could not have spotted it in 1980! However doing A sip IN a good fund is not luck..it is smartness.

  7. This article is certainly a balanced one but off late i am seeing many articles by many ‘experts’ that says buying a house/flat is a stupid idea.. rent one.. invest the amount in shares… index shares…and in 30 years you would be better off vis-a-vis buying an apartment etc.. this argument is specious at best and misleading at worst… I remember reading an article in New York that had the Native Red Indians sold the Manhattan area, 300 years back, and invested that $25 dollar proceed at 10% compunding the amount now would be $ 25 Billion etc :)) – something stupid like this.. Investing in a flat, to stay there, is not just a emotional high but a huge convenience. You need something called permanent address for many things – finalizing a school near-by etc.. you can’t be moving around within a months notice from the landlord. Subra’s article however looks at real estate as an investment and discusses the pros and cons.. which is why i felt a balanced article on this subject in a while now.

  8. Actually making you need a house emotionally is a part of the conspiracy of the rich! Imagine in a Godforsaken suburb of Mumbai 60 km from Churchgate / Vt you get a flat for Rs. 70 lakhs. I remember a friend sending me a mail from US saying for the price he was being offered a ‘bunglow’ in Cochin, he could buy a small ranch in Texas. Having said that a house is a necessity from an EQ point of view, not from an IQ POINT of view. However given the inefficiencies of the retail investor a house is a saving and usage asset – not an investment asset.

    Let me say this on my blog for the zillionth time – you make money because of your brain, not in ANY ASSET class. I have seen people make/lose in real estate, bluechips, IPO, …so why argue?

  9. At the cost of sounding cliched, it would not be off the mark to suggest, it is all about efficient allocation of capital (limited I suppose! :-)) – nowadays with every pocket awash with hyper-liquidity, decision making relating to efficient allocation of resources is easily waylaid by feel-good marketing through media or word-of-mouth – that cliche (again) about a fool and his money will soon be separated has been defied or postponed by the note-printing presses ….but the question is “For how long?” – To take note of the quote of the Oracle “When the tide goes out…..” you have to decide for yourself which is that asset you would rather be owning?

  10. subra,
    I have read this statement almost 15 times that
    Rs. 10,000 invested in Wipro (it would have appreciated to Rs. 300 crores

    what are you saying….I still can’t believe in..but i have to believe when statement like this comes from you

    Can you please tell me how come they are Rs. 300 crores today

    This really looks miracle…can you please do a post on this

  11. Mr. Subramoney,
    I just stumble upon this blog and read couple of articles and I must say it’s valuable blog on internet.

    Subraji, I am really shocked when I read that “Rs. 10,000 in wipro in 1980.. now worth 300 crores ”

    how is that possible sir ? that’s huge huge CAGR return ?

    do u mean divident is reinvested ?

    please help us to understand this

  12. Hi ,

    The author has erred on many counts. History has shown that only one company (GE) exists today that was there in the when original S&P started survived in US.

    Stock market returns are based on various factors including the price at which you buy and the kind of stock that you buy. Many companies which were darling of market in yester years have been wiped out.

    Buying a house make sense for following reasons
    a) You have an asset (unlike paper assets like enron/satyam/nortel shares )

    b) You will definately get more than what you invest . Tell me one person who has sold below the price what he has bought in the real estate (apart from speculators) Or in US where the population has degrown.

    c) India’s popualtion is increasing and ROTI , KAPDA and MAKAN are three things in everyone’s mind hence the demand will go up. There is scarcity of land too

    d) You have lot of tax benfits if you buy home even third or fourth home . Get in touch with CA and he will tell you

    e) Ask any rich person he will be owning lots of propeties whose value will be more than the investment in stocks .

    f) Stocks are good if you are very judicious investor and do a due deligence throughly , but with lots of paper stocks going around its difficult to choose one.

    g) In case of emergency , you can mortage your house and get money.

    Suggestion is that buy property better if you can buy land even if it is in far of places as you will see returns much better than any investment else your child will again say (Oh, only if my father had bought one more flat…” It was available for Rs. 2 lakhs, now it is Rs. 80 lakhs) at least its worth 80 lakhs .. if you invest in some bad stocks then 2 lakh will be 1 lakh)

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