This question has been asked so many times that I have lost count….
“Should my self occupied house be a part of my net-worth for investments”.
My answer is NO. A capital No.
Take a case of a young individual – say 30 years of age. If he has just bought a house for Rs. 100 lakhs with a Rs. 20 lakhs down payment, his investment statement looks so lopsided!
It will take him like forever to change the equation to look somewhere near balanced. For a 65 year old however, his portfolio will look balanced whether the house is included or not. Let us face it, for most people the house is NOT an investment – it is a psychological need of needing a ‘roof’ over his/her head where they can live peacefully. The cost of funds, the ROI, the appreciation make NO SENSE at all – it is only in the books, because it is not a home, it is a house.
A house is bought emotionally, not very mathematically – and it is fulfilling a need, but not an investment need.
So when you calculate your networth remember to include your provident fund, ppf, paid up value of the life insurance policies, cash, mutual funds, equity shares, gold biscuits, ….etc. but NOT your golf club, camera, car, house, jewellery – these are ‘usage’ assets. You have not bought them for it to appreciate – but for use. If it appreciates, that is a bonus.
Yes there are many financial considerations – is it cheaper to rent or buy, what is the yield, is your job secure, will your wife continue to earn or will she take a child break…..but ‘it will appreciate’ is NOT THE REASON TO BUY.
Hey remember it is your house, not just a mortgage 🙂
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