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. 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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