Why you should buy a house RIGHT NOW
This goes against the post of the morning. Why am I contradicting myself?
Why did I say…do not buy a house in the earlier post..and why am I saying ‘you MUST buy a house’?
Well, the assumptions when you rent are:
- you are earning well, can afford to buy a house, but you are not buying
- you are using the money saved in good investment options – equity mutual fund or direct equities
- you are disciplined enough not to miss any SIP
- you have enough emergency funds and you will not dip into equity corpus for an emergency
Sadly for many people I know – including millennials – this is not true.
I know couples who spend far too much. This itself means they have less amount of money to spare. Even if they do spare, it is in a RD/Fixed deposits and is extremely inefficient way of handling money. Many of them are completely unfocused and will not put money away in a systematic manner. I know many parents/ In laws who think that their children spend too much. In a few such cases, the parent makes the down payment and force their kids to pay the installments. This is their way of instilling discipline in their kids.
Many of them will not have the discipline to review, do asset allocation, etc. NOR will they hire a planner to manage the stuff for them
Many of them on, the other hand, will be able to pay the EMI – because it is compulsory. Women with homing instincts will do anything to reduce their expenses if an EMI has to be paid. The same amount of respect or commitment is not seen for a SIP.
I also know of a 50 year old who has been living in rented houses, and most of the money has been lost in equity ‘trading’. So at 50 he has neither a house nor a big enough portfolio to be able to buy a house. I know a 33 year old couple who will keep their money only in bank fixed deposits. I know many of these young Indians who will not (never) have the discipline to put away money in an SIP.
So if you do not buy a house, show me the SIP / direct equity portfolio. The portfolio should be good enough for you to buy a house without any borrowing.
There are just too many people who cannot do this – in fact they are the majority. Sad, but true.
If you are going to keep your money in Recurring deposits, fixed deposits and pay 30% tax on that…..hey joker you are surely MUCH BETTER OFF BUYING A HOUSE NOW…
Vijay
No one can play a better devils advocate. Hail subra !!!
Gov
And that’s perhaps why most parents/elders push everyone to buy a house. When kids can’t even wake up and get ready by themselves each morning… SIP/equity/XIRR etc. is a distant dream. Lock them in home EMIs!
kamol
From a father-in-law’s perspective, if son-in-law is buying a house with loan is beneficial because his daughter will have some stability of permanent stay in one city, locality, schooling for children etc.
Otherwise the son-in-law will spend everything he is earning on mobiles, car, furniture, other luxuries etc.
I mean to say that not all decisions are based on mathematics & ROI. There is lot of psychology behind the decision of buying first house.
umang jain
Although Subra meets more people, and has more experience but are people especially millennials are so naive that they will spend way beyond their earning capacity just to keep up with the neighbors? I have seen many are moving to SIPs and are conservative spenders. As people are becoming more and more financially educated and aware things are changing for the good.
Rakesh
Very true. Just had an argument with a colleague yesterday on it. He opted to buy a Rs. 50 lakh apartment with the intention of doubling in few years.
subra
Oh Genius Umang Jain I hope the comment prior to yours answers you? Anyway Jains – whether Marwari, Punjabi or Guj are financially savvy enough. Surprised that they read my blog, but thanks.
Rajat
I dont file an ITR, What are the options available to me to get a home loan?