For a minute forget all the math of buying or renting. It makes sense to buy rather than rent. Yes I know that this is against all the ‘renting is better than buying’ gyan that I have dispensed with!

Why? What happened suddenly?

Was the math wrong? No.

What went wrong was the human attitude towards some payments. When a guy (or a girl especially the wife!) make a SIP payment or make an EMI payment – the attitude is completely different.

When I say ‘rent’ and use the amount saved to buy equities, the person does not maintain the SAME discipline. When they are making the EMI payment, they are worried that the lending company will take away the flat, or they will be thrown out, …etc.

However when it is a SIP – they have the following questions:

– the market is going down should we stop the SIP?

– the market is going up should we stop the SIP?

– it is my sister’s marriage, can we stop the SIP for 4 months?

– my father is not well, can I stop the SIP?

———a million questions where they actually want to hear YES.

So is all this theory? No. Not really. For many of these people who I met their networth of X is made up of their HOME. The value of their home is say Rs. 3 crores, and their networth is Rs. 3.4 crores – or say Rs. 5 crores.

For most of these people, their one home is clearly MORE THAN 50% of their net worth, and obviously this has happened by inflation.

So suddenly if you tell them that their net-worth has gone up by inflation (and not by their savings growing in any asset class) they do not like it too much. However this is obvious – and when they sit with their LESSER EARNING COLLEAGUES or cousins, it hurts and hurts like mad! Simply because the net worth is a function of how much their houses appreciated, NOT how much they contributed to the SIP.

So based on a nice half baked survey that I have done, for most (most is not all) people buying a house has made more sense.

This is not because of any mathematical reason, just the fact that people are not as committed to SIP as they are to EMI.

Sad, but , true…


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  1. @girish

    “I dont know about the returns of real estate since its not transparent” – So, you know that you really cannot claim anecdotal evidence of “great returns” from real-estate, at least in our country.

    “you cant generalize with sensex or nifty returns” – ok, pick up any benchmark and check the liquid transparent instruments based on that (read mutual funds. and if you have read subramoney for some time, you will know which of the managers he prefers as compared to others). Otherwise, the index fund is a decent fallback position.

    “if one is stock specific, it will beat the rest hands down.”- There is a reason why most smart people prefer a decent diversification, if not a diworsification. Stock specific returns can be better, can be worse.

    Just because one cannot do Direct Equity investing, does not mean that (s)he should not participate in the equity markets.

    Real estate is illiquid and a consumption-item, not an investment item, unless you can get 5 properties (then it becomes a rent-generating diversified asset class).

  2. @Krish

    Real Estate is ALSO paper wealth. Its your ownership document (patta, land/apartment registration document) which allows you to claim its your property.
    Share/Equity ownership is also similar. You can claim (part) ownership based on your equity shares on company assets (Real assets including machinery, real estate, brand value, future earnings).

  3. didnt quite get that. more than the benchmark or anything, one should look at the underlying portfolio of mf. that will give some idea about the competency. anyways, i am not looking for any mutual fund. i am direct equity guy. i dont diversity just for the sake of diversifying. dont believe in super concentrated portfolio either.

  4. Ramesh,
    Just a sample for RE:

    Similar case with most metros.
    Due-diligence should be done with RE as well as Equities (and MFs!)

    Depending on how much you can afford, and how much time you can lock-in your money, and what kind of research you can do, you can choose between equity vs RE.

    IF you have enough cash, I feel due-diligence check-points in RE are slightly easier than equities. And at the end of the day, worst case scenario, with RE, you still have a roof over your head with optional rental income. 🙂

  5. If the rate at which RE appreciates is more then how much your SIPed MF money is increasing, then isn’t it better to invest in RE?

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