Well this is based on an article I read about the Great American Dream….which includes buying a home. So does the Great Indian Dream. I keep getting how buying real estate is a great way to earn a lot of money. The real question, is what percentage of home purchasers would have been better off if they had rented instead.
Before you decide whether real estate has given good returns, one has to see what happened to the people who had bad or bitter experience with the buying of real estate..I mean the following set of people
- People whose houses depreciated
- People whose houses didn’t appreciate at a rate sufficient to overcome the transaction costs
- People who did not get possession of the house in 5 years even though they were promised ‘5 months possession’
- People who got into a dispute with a builder who is absconding / absconded
- People who expect to move in less than 3-5 years or so
- People who end up moving unexpectedly in less than 3-5 years or so due to:
- Lost job or bad industry
- Illness – impacting ability to earn
- Ill parent
- Bad job
- People whose other investments would have made more money than their home equity did during the period of home ownership
- People who have a hard time selling their house
- Increasing interest rates increasing the EMI to an unaffordable rate
The problem is we do not UNDERSTAND the risk that a person took when he/she says “I bought a house for Rs. 1.3cr and now it is 2.8 cr. This is to be examined under the above circumstances of ‘what could have gone wrong but did not’. One should also see the risk of Real Estate.
Funny how most of us can see the risk of shares but not the risk of Real Estate….
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