Controversial Debate on Buying vs Renting a House

POSTED BY Jagoinvestor ON July 11, 2010 COMMENTS (158)

There is a very good debate going on in the previous article I wrote about EMI and how it can change your decisions regarding Home loan and other Loans. A lot of readers have put their thoughts about the Home loan and whether they prefer Buying or Renting, we got a lot of readers who supported Buying and some said renting is better, the conversation went so in the flow that It was worth mentioning here and getting everyone’s point of view.

So please go through these views on Buying Vs Renting and put your comments and views on why you support Buying or Renting. The main points discussed where the opportunity cost, Emotional satisfaction and what are the prospects in return over the long term in real estate.

Should we buy our own house or live on rent?

#Conversation 1

Meena Says’s

I liked this article immensely and echoes my sentiments exactly. I agree with you regarding the way people go overboard on car loans and personal loans to satisfy their craze to keep up with their friends and neighbors. But I would differ on the home loans. For most people, buying a first home is an emotional decision especially if they want to occupy it for personal use. Even if the value of a self-occupied house appreciates substantially, it is only notional as you don’t want to sell it.

I want to relate my personal experience on the home purchase. We are a joint family and about 14 years back, we (my husband and I, both working and earning) purchased a 2 BHK flat in a Delhi suburb for 11 lakhs. We wanted 3 BHK flat badly but could not afford the EMIs although it cost only 2-3 lakhs more. But a few years down the line, both our incomes increased and in hindsight, we repented the decision of not going for the 3 BHK flat.

Now the cost of the same 3 BHK flat is close to 80 lacs which is quite unaffordable. So my point is, while deciding on the home purchase, look for present affordability as well as future earning potential. Also buying a house is any day better than renting it out if you have no plans of relocating to any other place.

My Reply

I agree that the decision would depend on the current affordability and future earning potential. However in your case as you said that you were not able to afford the 3 BHK that time, does it mean that you were not able to pay any EMI if you took 3 BHK or for the next several years. I think the mistake happened in not able to factor out your earning potential of the future? Correct?

I would like to hear your views on why you said that “Buying a Home is anytime better than renting out if you are going to stay at the same place? “. Under what assumptions do you say that? Will it be true for any case, do you also consider the other alternative of investing your money somewhere else? Are you biased towards emotional attachment related to this overall buying home issue?

Meena’s Reply

Hi Manish,

We anticipated that after paying EMIs for 3 BHK flat would have resulted in a liquidity crunch for some time. So we did not take the risk at that time. But what we did not factor in, was that the liquidity crunch would have lasted only for a very little time as the incomes also increased.

When I said that buying is better than renting, is not an emotional decision but a pragmatic one. 1. For one, investing in a house is good for your asset allocation – you are spreading out your investments in Equity, debt, real estate, etc. 2. I do not buy the argument that the money spent on EMIs are better deployed in other investments like MFs or stocks.

At least in metros like NCR, the real estate gives decent returns over the years (a CAGR of 12-15% in 10 years as in my case). 3. Also renting a house has many hassles: Rents increase @ 10% p.a. and you are at the landlord’s mercy as he may ask you to vacate anytime. 4. You get very good tax breaks when you own a property. All these are good arguments for many people to invest in at least one property.

My Reply


I will agree with some of your points.

1. Asset Allocation: Yes, you achieve asset allocation by investing in Real Estate, but in the early phase if your debt and equity is not high, then even asset allocation is stretched on real estate side much, for example, if one has just 2-3 lacs in Debt and 4-5 lacs in Equity and buy a real estate of 50 lacs, that 85% Real estate, 5% Debt and 10% Equity, though there is some asset allocation, but still most of the portfolio is in Real estate, However, what you say about allocation makes sense when there is good balance between all the 3.

2. This can depend on what kind of investor you are and your concept about “owning home”. For an investor profile like yours, it will actually not makes sense because your priorities are much different, you feel more satisfaction in “owning home” and that your priority, however, there are many readers I have interacted with and know them who are more comfortable with the option of renting out and that makes them more comfortable, It might make sense for them to deploy the EMI – rent money in other investments, at the end if you know what you are doing makes sense.

Also regarding the returns from real estate, there are 25% returns, 15% returns and even 5-6% returns also in the last 10 yrs depending on the location and timings. In the last 10 yrs, the situation has been very different and the next 10 yrs will be different than those, What you get in returns as % terms at the time of selling the property will actually matter and not for the time when you actually Hold. So it’s my rough guess that if you live in the same flat for the next 20-30 yrs and then sell the flat, you will find out that the returns over the period of times will be in single digits, maybe 10% max.

Historically real estate has never given more than 9-10% over the very long term (very long term again) in the last many decades (even centuries), so I dont see why it should be different now. Real estate runs in cycles and they are long, a 10 yr return in real estate can be very different than very long term returns figures, while I say this, I will also say that real estate in India is promising and next 1-2 decades can be exceptional and give returns on the higher side of average till date.

3. Renting has hassles, but has advantages too, just like owning our own house has hassles and advantages of its own, so what you call as hassles might not look like hassles to someone else. It’s different for different people, and everyone is right for themselves.

4. That’s very temporary and introduces some years back only, in the DTC earlier there was a proposal to take the tax breaks out, but with the updated draft, I think it’s still there. no one knows if that will remain or go away in another few years. So tax breaks is not a criteria to decide if one wants to go for real estate or not. You should read real estate articles, you will get a clear picture of what I am saying

Conversation 2#

Pramod Says

Manish,  This is absolutely right. There is a big industry flourishing on “how to get you into debt trap” mantra. The best remedy against this trap is self-discipline. The temptations are high which tends to divert your attention. My wife is asking me to buy own house but I have only one answer that is expensive.

She asks, Property has been expensive for the last 100 years, it will never become cheap. Right, but for me inexpensive means within my reach. The house I want to buy should not come bundled with Headache, High BP and insomnia. What I tell her is that we will buy a house when –

  1. The total cost of the house is not more than my 4 years’ income.
  2. have enough savings to pay a down payment of at least 30-40% of the price.
  3. EMI must not be more than 10 years long.

So now for me to buy a house either prices have to come down or my income has to go up. BTW I am betting on the prices to be stagnant and my income to be growing for at least the next 3 years looking at the supply that is coming up in NCR. In Greater Noida alone where I live, more than 70000 units will be available within 15 km in the next 3 years.

For a car, I prefer a second-hand car from Maruti, It is always good. Most of the depreciation takes place in first two years so let someone else pay for that and you enjoy the ride.

My Reply

Haha, Wife is a very scary word when it comes to the decision of buying Home, I have already talked to several people here who’s wives are bugging them like anything for owning house. You are correct on the “industry working on getting everyone in Debt trap” . over the pricing of real estate, the bubble is strong and I can’t say when it will burst, but whenever it does, it will be very bad day to see.

However, even if it does not burst, Still living on rent is so affordable in today’s times that we can do it for next several years .. after all, if everyone will buy and buy only, who will live on rent?

Pramod Says

Yes, Today I am residing in a flat with a rent of 7000. If I were to buy that it costs 30Lacs. At 80% loan which is 24lacs the interest @ 5% (flat equivalent to 10.5% reducing) comes out to be 10000 a month. Remember I am only talking about interest here so that comparison should be only in the costs. Add society maintenance, maintenance (paint, pest control, seepage repair), property tax, etc to the cost & surprisingly you will find that rent is cheap.

Also if I add the opportunity costs i.e. investing the EMI and front cost minus rent in an MF with only 10% return it will become 1.32 Cr in 15 years so if the flat in which I live today is available for 1.32 crore after 15 years, it’s OK, nothing to worry.

Secondly, detach emotions from house & treat it like a commodity. I often ask people when you dont have a car do you whine about using public transport or do you feel embarrassed about hiring a taxi. If no then why the hell you shy living on rent. Just pay that cheque & save all the bothers of becoming a landlord. One more benefit of the rented house ” You can always change it easily when your astrologer tells you that it is not VASTU Compliant, Will you ever get such wonderful chance to enhance your luck so easily in your own house

My Reply

Pramod, you are one of the rare found die-hard fans of renting. While your views are more biased about renting, which I fully agree. You have taken out some of the things which drive people to own home and that can be pure emotional reasons and its fine.

Some people will feel suffocated enough to live in a rented house and the idea of not having their own home will kill them each day, this idea of renting if better than owning and blah blah will not work on them no matter what one does

While I am with you on renting, the point I want to make is renting vs buying has its own positives and negatives and nothing wrong about it, just that a person should understand which boat he wants to sail in. What do you say Pramod? Read Meena’s comments above, you will get what I am saying

Pramod Says

Manish, I am a fan of renting as long as the rent remains within the 3-4% range of the property value. As I shared with the group I am also planning to buy a house but only when it is affordable. I do not want to spend the next 20 years of my life in stress & sacrifices.

As far as Meena’s points are concerned, I am 120% in agreement with her on-point no. 3 and that is the single most reason that provokes many to buy a house.

But in these days of apartments you can negotiate well as owners know that an empty flat is going to cost him the maintenance and it always depend on your relations as well as the demand-supply situation.

Coming to the other 3 Point –

1- House as an investment, An investment by def. is something which you are going to encash upon value appreciation. So your first house is never going to fit into this axiom. Are you going to sell it after 20 years? 99.9% of people won’t, so what kind of investment?

2. The investment in MF vs Real estate depends upon your kitty. Till the time I have 5-6 lacs accumulated can’t even dream of buying a property even on loan so it always depends on your net worth and no arguments on this point as it is very personal.

3. On this point I agree but again it is emotional and depends on the market. In Gr Noida where I live 50% city is empty so no dearth of flats on rent and I can negotiate.

4. This is one thing that comes as the ultimate logic for buying a house. Let’s see. The principle amount is incl in 80C so after PF, Children fees & insurance what the hell is left. For interest, you can claim tax 1.5 Lacs. Anyone who can buy a house worth 30Lacs must be earning 50K & in this salary, the HRA usually is 10000 approx. so if you take benefits of 1.5l interest payment you have to forego 1.2 lacs benefits of HRA which brings it down to 30k.

Is it worth to buy a house to save a maximum of Rs.9000? Better not watch some crapy movies and save 200 rs on popcorn which is available for 10 Rs outside the cinema hall.

Finally indeed renting and owning has its own pros and cons but here we are discussing these things from personal finance angle not emotional otherwise nothing can replace the joy that I can see on the faces of my family if I take them to Switzerland but can I afford it And also we have seen many old people who spent their life savings owning a house and are still struggling to meet life’s basics in the last stage of the life. Is the house really an investment?

So remember 1st house is always a commodity that you are going to use and 2nd, 3rd …nth property is investment only so do not buy the argument of returns however use these “returns” to check the affordability factor for you say X years down the line if you will still be able to buy that flat.

My Reply

You have made some excellent points . However on one point, I would like to comment. You said

“Are you going to sell it after 20 years? 99.9% of people won’t, so what kind of investment?”

Yes, you are correct that most of the people would not like to sell and will not sell. However if the price of the house is a lot and one has got some good returns like 15-16% CAGR in the last 20 yrs, one will be sitting on a very expensive house and it can act as an emergency fund to them.

If a person house is costing say 2 crores and they can buy the same kind of flat on the other place at 1 crore, maybe in another city, in the times of job crises and loss of income, one has an option of selling the first home and moving to the same quality/size house at other place and cash on the rest in some instrument which will act as a monthly income to them.

So overall I would say, even if a person does not sell a house, he/she has some good unused advantages.

Meena Says

I totally agree with Manish’s views that even if you have no plans of selling your house, you are sitting on a wealth which would give great peace of mind when you have repaid all the EMIs and the house is all yours. My father bought a house in a prime locality in Delhi 40 years back for Rs 30,000.

I calculated the CAGR of the property keeping the current market value in mind. It is a cool 18% return that we see here. If my father had thought like Pramod and other fans of renting, he would have a tougher life as a retired person living in a rented accommodation in some outskirts where rents are cheaper.

I also agree with Pramod that the first house is more a commodity than an investment. But if you are not going to buy the first house, where is the question of buying a second property as an investment. The tax benefits of the second home (if you can afford) is even better. You can get the deduction of the entire interest amt from the taxable income.

So by totally ignoring this avenue of wealth creation, you are missing out a vital component of your asset building. Mind you, I am not discounting the importance of PPFs, MFs, etc here. I am still a great fan of owning the house in spite of very persuasive arguments put forth by Pramod, Manish, and others in favor of renting

Raja Says

Wow!! that’s really an interesting conversation going on here. I just would like to add my 2 cents here.

1. Rental price as we discussed, is a function of demand and supply. Essentially meaning that the renter is not so much in control of how much he might have to pay for the same accommodation on a future date. Just calculating it as 3-4% of the current property price and ruling out the future rental price appreciation doesn’t sound too prudent to me.

When a person buys a house on loan he basically locks in his outgo in form of EMI to a certain extent. Of course, drastic interest rate changes on the upside can alter his calculations.

But I think in the mid to distant future India has a better chance of seeing interest rates softening like so many developed nations than it moving drastically up from the current 10% range. Whereas when someone is depending on the rental mode of accommodation he is exposing himself to drastic future variations in rent.

Take for example the case of a tier-2 city like Bhubaneswar. Not so long ago (around 5 years back) the rent for a decent 2 Bhk used to be in the range of 2-3.5 k. In just 5 years’ time it has skyrocketed to the range of 6-8k for the same accommodation.

The rise is mainly attributed to a rerating of the city as a small IT hub and the factor’s like a growing number of IT professionals employed with Infy, Wipro, Satyam, etc…Now someone who had the affordability to buy a house 5 yrs back but didn’t do it is surely ruing the decision. Of course, property prices too have risen in similar fashion so buying now is even more difficult.

2. I am not aware of the statistics but I guess most of the new houses are bought by people when they are of marriage age. So, probably the age profile will be in the range 26-34. This means the main cash outgo in form of EMI will be over by the time they in the age range of 41-49 (Assuming an average 15 yr loan).

There are a good 16-24 yrs of life left after that (Assuming a life expectancy of 65 years). What are trying to say is with buying a house one will be done with most of the hard work in his prime working years. Whereas rent is a never-ending story, one has to keep on paying the rents for his lifetime.

3. Reverse mortgage – Even if one were to see some bad time during old age reverse mortgage can come to rescue.

4. If the roof over the head is assured it’s easier to live off one’s savings for a few months/years if one were to see bad times in the form of loss of income. isn’t it ?? I mean it’s not impossible to live with just food-transport-communication expenses in the bad times. Add the rental expenses to this list of expenses and suddenly it would seem a little difficult to manage. Of course, the assumption here is the bad times are after one has paid off the EMI’s

Conversation 3#

Rahul Says

Dont quite agree, Manish this time.

Let’s take the example of the couple with the 3-BHK flat. Recently married, they will need a 2-BHK (AT LEAST) in the next 3-4 years, as they will start a family. If they have frequent guests, like parents, (of both husband and the wife), relatives, friends etc., they will need at least 1 bedroom extra, making it a 3-BHK, which is the minimum requirement nowadays.

There can be several other cases requiring such a flat. If either parents’ stay with them, or they plan to have 2 children or they have relatives/guests/friends staying over, a 3-BHK becomes a minimum requirement. Also. once they buy a bigger flat, they will pay it off in say 15 or maximum of 20 years, if not earlier. It takes off a big headache, once you have your roof over your head. No tension till you retire! With property prices rising, it is a good investment too.

On the other hand, if they buy a small flat, in addition to daily problems of staying in a small place, they will have the constant headache of looking for a better, bigger property. And with increasing process, it may not be in their reach too. So, better buy it now and finish it off.

What do you think? Do you have better ideas?

My Reply


You have not taken the article in the right sense. I am talking about people who buy beyond their capacity just because EMI is available. I have clearly stated in the article that people who have a requirement and can’t do without buying something have to buy it.

What about the family (only 2 people, married) who can not afford a 3 BHK and can only afford 1 BHK. Dont they get guest or dont start a Family? They do. They make adjustments and how many times do guests come, it also depends on that. I am little crude on this, but I personally would not like to buy a 3 BHK because my guests come for 4-5 days in a year. I rather sleep on the floor and offer them the room. That’s a better choice, at least for the initial years till I am capable of affording a bigger house.

Another point you made was that if the couple is starting a Family soon? Wh y is it necessary to assign a separate room to kids till they are 7-8. You can manage things somehow. We are talking about cases where a person can not afford a bigger house. Dont you think so?

Rahul’s Reply


I think if you buy a smaller house and then go for a bigger one after 6-7 years, it may get out of your budget by then, especially the way India is progressing and infrastructure is developing. Practically all Indian cities are bound to expand as more and more people move to the cities and our country becomes an urban country from a rural one.

In such a scenario, it makes sense to accumulate as much land(flats etc.) as possible. It is almost certain that land, flats’ prices will keep rising for the next 20-25 years. Besides, practically speaking, paying off steep EMIs just beyond your reach inculcates a habit of savings too. One has to pay the high EMIs to come what may, so expenditure is automatically checked.

I have seen this in numerous real-life examples I have also seen that having 4-5 residences gives one a feeling of financial security and achievement too! Keeping all this in mind, I’m all in the favor of paying steep EMIs, just within your reach (leaving just enough for daily expenditure and a 5% room for emergency exp.) to accumulate as much land/flat as possible.

and Manish you said about sleeping on the floor when a guest arrives. Really, that is taking it too far! I mean, the house you have should have some spare capacity. Homes in which we live is the best indicator of our financial status. What point is served to be a crorepati, if one has to sleep on the floor if a guest comes in !! And what if by chance there are 2 guests staying overnight?? really embarrassing!

What do you think?

My Reply


You took it too literally. Sleeping on the floor means sleeping on the mattress, not “on the floor”. Dont we do it? There will be instances when you have it no matter how big your house is, even if you have 3 BHK, It can happen that you have many guests which can be accommodated on beds and in different rooms, That is the time you always shift on the mattress on the floors, That’s what I meant.

And it depends from person to person what is embarrassing for them or not, I personally would rather be embarrassed squeezing my financial life and being in debt up to neck rather than sleeping literally “on the floor”. Its a personal choice, nothing wrong . What do you say about this?

158 replies on this article “Controversial Debate on Buying vs Renting a House”

  1. Raghu says:

    It was the right thing to discuss. I think buying is the better option than renting. A common person dream is to be a owner of the house. In my way buying is the best one.

    1. Thanks for your comment Raghu

  2. LifeRenter says:

    I have read all the posts here . One thing I want to point out that there is a fundamental difference between things like gold, equities, interest rates etc . and real-estate . The former things price is same where ever you go . But real-estate price is different even within the same locality depending on the social class of the people. For example in Pune where I stay say a flat rent is 15 K , you can find a place with the same sq feet very nearby with a rent of even 5K . Yes the quality of the flat , or the neighbours may not be good . It is a kind of a thing that has been very subtly created by the builders and the government because you need all in a city . So you have these walled apartment complexes thriving side by side the dwelling places of not so well off working class people . Some of my friends who are from upper middle class and rent at very high price are shocked when I tell them that I stay very near them with a larger sq feet area and at cheaper rent . The only thing is my neighbours are of working class background. I even asked a real estate guy about it . He clearly stated that they purposely increase rent/buy price in some localities to let high class people stay away from the low.
    Another thing I want to point out that those 2 BHK flats which costs 70L – 1Cr today are not heavenly bodies . They are just 2 bedrooms or so in a tiny packed place . If somebody is buying them for capital appreciation and expects to sell them for say 2Cr in say 7-8 years time they would be totally dissapointed . Firstly these flats will be out of reach of the top 1% elite salary persons by then . Do you believe the rich will pay 2Cr to stay in these kind of flats ? , even the rich will not buy them . So I believe that basically these flats will not appreciate further unless they are very deluxe suits . On the other hand if we invest the same amount to buy say 3 flats which costs say 30L each the I would say it is highly likely that by 7-8 years time they would give high returns seen totally.
    Another thing is that I believe that in the coming years there will be plenty of plain neighbourhoods inside the inner city which will be going to be developed into towers by the developers . So there will be no shortage of flats at correct prices . Yes today the flat which costs say 70 lakhs , that particular flat in that particular neighbourhood will never be affordable by me but I believe I can always by a similar flat at basically the same inflation adjusted price in a very nearby locality . So here there is a difference between comparison with other stuffs and real estate . When gold goes up you cannot buy any gold , but when real estate goes up its just only in some localities you can always buy some real estate in some other nearby locality in the city . I think certain parts of Mumbai and Delhi may be exceptions but in general all cities are full of not so well developed areas . There will be hige pressure by civic bodies/ and developers to develop them . Instead of paying a high interest why not buy later.
    One very good strategy I believe is that one can by a flat at a very very cheap price just outside the city say at 15-30K in Pune , also stay in a good flat inside the city until retirement say at 15K . If some one asks about flat say that I have bought one . It really builds confidence and credibility when you can show that you own something croncrete , not a piece of paper . As long as you are working you can rent it out , after retirement you will have options , 1. Move in the flat 2. Sell it and buy another one . 3. Just carry on as before .

    1. Hi LifeRenter

      I think you have made very valid points. Real Estate is not always the best option. You need timing and careful buying

    2. Prajith says:

      Hi LifeRenter, I gonna bookmark this comment 🙂

    3. Abhishek says:

      Hi Liferenter

      Can you please tell me your society name and area so that I can have a look and understand it. It looks very interesting..

  3. Nikhil says:

    I recently happen to ponder over this question from a purely return point of you. Being a devotee of mathematics I couldn’t resist myself from deriving an equation comparing buying a house versus investing in equity. So lets get out hands dirty:

    F/A = f.(d^360) + (((0.00892)(1-f)((d^361)-1))/(d-1)) – n.(((rd)^361)-1)/(rd-1)

    Pls find a google doc link for a better view of the equation:

    A = cost of asset (home here)

    f = down payment fraction (usually 20% i.e. 0.2)

    Loan term is assumed to be 30 years with EMI of 892 pm for each lakh; i.e. 0.00892 Rupees for 1 rupee of laon (this fits with 10.20% home loan rate)

    n = monthly rent as a fraction of home price. So if the home costs 50 lacs and a similar home is available for rent at 10,000 pm then ‘n’ will be 10,000/50,000,00 i.e. 0.002 which is also a typical number.

    d = monthly rate of return on your investments; had you put your money in stocks/MFs instead in home loan EMI. Should be taken ~1.0% monthly (==> 12% annually) or more for long term investments

    r = monthly increase in home rent every year (usually 0.4% monthly OR 5% annually)

    F = your final corpus had you not taken loan and gone for investments. So it’s a good idea to see (F/A) ratio; which for typical values of f,n,d and r should turn out to be > 1 if you want to favor investments instead of home loan.

    With typical values of f=0.2, n=0.002, r=1.004, d=1.0095; we get
    (F/A) = 9.266
    that means had you not gone for a 30 year loan on a 50 Lac house, you would have around 4.6 crores with you after the loan term of 30 years. So here you have to weigh 4.6 crores of cash versus a home which costed 50 lacs 30 years back. So what return would make those 50 lacs worth 4.6 crores today ? It turns out to be 7.7% p.a. So if you can get (or hope) for a 7.7% or more return on your home for 30 years then going for it is a good deal; otherwise its not. Personally, I don’t believe that indian real estate could give such good returns on real estate over such long period. Home prices ought to follow inflation rate sooner or later.

    However, if you happen to be a little optimistic and assume these values f=0.2, n=0.002, r=1.004, d=1.012 (15.4% return p.a.); then
    (F/A) = 19.77
    and this makes you crave for 10.45% return on your home property over 30 years.

    So, choose wisely 🙂

    Note: I have not taken tax adjustments into account. But I believe they favour if you rent your home as HRA is for whole life but interest deduction is only for the period you pay interest. Secondly, the loan term is taken as 30 years and installment is taken is 892 per lac for 360 months. You can work out your own equation with replacing proper values. Needless to say that 360 is the number of months in 30 years. Also you would be left with a 30 year old home; so judge the future value of your home accordingly. Lastly, owning a home also causes regular repairs which have been kept out of equation.

    1. Nihil

      THats a bit heavy when I look at it for the first time. Thanks for working on it . Is there any 1 para conclusion out of your derivation ? I will check it out in detail later

      1. Nikhil says:

        Yes Manish, its heavy cause its very general in its treatment of EMI and house rent; however at its core its just compound interest. And the inference part is the conclusion. In simpler words, I would say:

        (i) If you assume 12% return on your investments then you’ll have 4.6 Cr now had you not taken the 50 Lac loan 30 years back for your home. And you have to somehow weigh your 30 year old house which you bought for 50 lacs versus 4.6 Cr you have in cash now. It turns out that you would need a 7.7 % appreciation on your aging house for break even. If you think your property will appreciate at 8% or more than buying a home is a good idea; otherwise not. I personally don’t believe that one could get such good returns on your property for a long period; sooner or later property prices ought to follow inflation rate. Present huge property prices are due to heavy demand and they will settle down in future.

        (ii) Now if you were a little optimistic and assume 15% return on your investments, your equivalent corpus after 30 years becomes 10 Crores and you would crave a 10.5% return on your aging property for 30 years to even things out.

        1. Thats a great point and analysis. I am myself a strong believer that real estate is a short-medium term speculation product which can really create good wealth for someone (one of my client bought a 30 lacs property few years back and selling it for 1.4 crores now) .

  4. Pramod says:

    Well, in India and with the amount of money being printed world wide we need to invest in real assets – like houses. However, there is always a possibility of a bad deal.

    Another interesting article that I read along this lines is here:

    1. Pramod

      thanks for that link , yes the decision of buying or renting should depend a lot on the rental yield !

  5. Jassi says:

    A good blog:

    May not be relevant here, but gives a different perspective.


    1. Jassi

      This is really a great perspective 🙂 . But I am sure in Western countries, housing prices are not moving north in high speed, hence this thinking 🙂 , In India this article will not be taken seriously !

  6. Shaman says:

    Hi Manish,

    I have a query , can you please give your opnion.

    1)I have the understanding that both HRA and Home loan interest cannot be claimed for tax exemption.we can just claim just one of them right..?

    2)If my HRA is say 18000 Rs (Approx 2 Lakhs Annualy), and my Home loan interest does not cross 30,000 Rs Annualy , For a loan of 10 Lakhs (4 years tenure) , it does not make sense for me to claim the Home loan interest part for tax exemption. So i can still stay in my own house and claim rent with in 15000 Rs. Possible right..?

    3) But if i am going for a second home , will i be eligble for full tax exemption on interest part.?

    1. There is no restriction like what you have mentioned

      You will get 100% tax exemption in interest part if the house is on RENT !

  7. Sameer says:


    Firstly, I would like to add another dimension of Location to this debate. All the examples I have read do not even come close to the Dilemma…

    I have been living on rent in Mumbai for the past 8 years. It is easy for someone to tell us to take the big leap (We are very much proud of all of you who have bought a house… and at the right time!!)

    I live in a 560 sq.ft. carpet 1 BHK in Santacruz (E) at a rent of 18,000 while the property is rated at a BARE minimum of 800 sq.ft (Built up) x 12,500 Rs./sq.ft = 1 Crore.

    If I were to buy this house, given the current state, would imply that I put down 20 Lacs as down payment and pay at least around Rs. 80,000 EMI!!!

    The simplest answer would be to locate to a farther place!! But WHY??? And even if I did, a place in Mira Road would set me back by 30 Lacs implying 6 Lacs DP and 26,000 EMI, thereby paying a total of 47 Lacs + Society charges + Taxes over a period of 15 years (I have not even begun to talk about the opportunity and time cost of living this far away from office!!!).

    It is just simple maths as to how many years you can go on rent without breaking your bank. Although I am on the lookout for a good deal to buy a house, for people like me, who do not have the hard cash or endowment from Family or In-Laws, I think this is the smarter and ONLY option.

    I am definitely open to a different opinion and a way out of this RUT!!! The only reason the Real estate market is booming is because of NRI brothers and those lovely businessmen who think that Real estate in India is the best way to get returns!!! They simply buy up flat after flat in search of appreciation whereas no one bothers to think about what they are doing to the prospects of a genuine buyer!!

    Secondly I would like to extend my heartfelt thanks to the Builder community who has stopped constructing 1 BHKs within the city!!!

    Thirdly I would like to congratulate the Architect/Brain behind including Swimming Pool+Gym+Spa+Club along with EVERY SINGLE PROPERTY to spiral the Built-up area to beyond 30% of the total area!!!!! Which in turn makes a 1 BHK a minimum of a 1 Cr affair within city limits!!!

    Lastly I would like to say that I do not know whether I am right or wrong… but this is how I see it. I am open to have my opinion changed.

    1. Sameer

      I really enjoyed reading your comment and that has come from your heart , no makeup’s 🙂 . I echo the same thoughts , but living in Pune I can see that buying house can have its own advantages 🙂

  8. Dharmesh Chitaliya says:

    Hi Manish,

    Actually i plan to prepay my home loan which is around 6 lacs remaining. i have nearly 2 lacs capital and for remaining 4 lacs i plan to sell gold. is it right strategies to opt from home loan. i pay monthly emi Rs .11000 , my plan is just prepay my loan and then invest that amount(EMI amount that is RS,11000) in mutual fund to get my money back withing 2 to 3 years. by this manner i can save interest which i should have to pay as EMI. But my big worry is about gold price.How much chances of increasing in gold price in near future. can you guide me. can i go with plan or you have any better suggestions.

    1. Dharmesh

      I think this would be a good strategy .. without worrying to much about gold prices , focus on now , deal with the current and get rid of loan ..


  9. Kevin Dsouza says:

    Hi Manish & Nandish,

    Hope you guys are doing well. Been reading articles on your website from time to time.

    With regards to Rent vs Buying, I have a few queries.

    One when it comes to buying and we talk about 15% returns, is it possible for you to illustrate the returns when buying a home with a home loan and 20% down payment. Suppose one goes on to sell it after 10 years, what kind of returns are possible.

    Also, Salman Khan of Khan academy has made an excellent video regarding the same rent vs buying analysis. One very important point he makes is that when you choose not to buy, your down payment money as well as the monthly amount you save by renting ( renting is usually cheaper than buying the same house on loan) is getting accumulated and earning interest in your bank account.

    Looking forward to your thoughts.

    1. Kevin

      Did you see the article which we did on returns from real estate in long run – .. also your question requires a long discussion , can you ask it in compact form ? Or better would be to initiate a thread on our forum to discuss it –


  10. Nitin Gupta says:

    Hi Everyone,

    I compared both the scenarios mathematically/financially.
    I have taken few assumptions also for simplicity. i hope all of them are close to reality of real state 🙂

    Buying: suppose a person buys an house of 50 Lakh. He takes loan for this entire amount at 12% for 10 years. The EMI he will bepaying is around 72K per month. He puts this house on rent for 12K. so for 10 years he will be spending around 60K(EMI- rent) from his pocket. for simplicity i assume that increase in rent will balance the increase in EMI and the money that he spends from his pocket will remain constant for 10 years. Now at the end of 10 years, assumin 15% appriciation in value of house. He will be having house worth around 163 L and he can get this amount if he sales it.

    Rent: suppose instead of buying the house he opens a monthly recurring deposite and puts the same 60 K per month. in this scenario at the end of 10 years, he will get amount around 138 L, obviously without any headache and risk :).

    i am not making any point here that which one is better, just wanted to compare scenarios. suggestions/ improvements are invited.

    1. Nitin

      Good calculation ,but this from basic point of view and there can be few things considered for betterment . I am just putting the points which has to be considered , I am not saying they are right or wrong

      1. This analogy is purely from the maths point of view .. but we also have to see emotional angle .. like Own house , self of satisfaction , no fear of loosing the rented place .. one can do what ever rework one wants ..

      2. For a 15 yr period , in second case , why to put money in debt instrument , when its a long term period and once can choose atleast balanced funds if not pure equity funds .

      3. The assumptions of interest rates increase and rent increases should change a lot of things ..

      4. The volatility part .. the journey is also very important .. job loss .. inability to pay the EMI in some cases , extra cash crunch and price fluctuations of house are not taken into consideration . Which can impact a lot of things


      1. Nitin Gupta says:

        Hi Manish,
        I know, there are many factors that i am not considering. but i see that factors are in favour of are against both the scenarios so they will be balancing each other.
        Also i am considering people who change there job and city frequently so even if they buy house with an emotional factor, they end up with giving it on rent only and it becomes a pure investment only. so i dont want to consider this emotional factor here.
        Regarding considering debt instrumnt only, it was just for an example. anyone can calculate it eaisly using EMI calculator using 15% or any other interest rate if considers equities. I wanted to see that what happens if a person wantes to play safe and simple. And i conclude that he is not missing a huge amount.

        1. Ok points well noted .. lets see if i can make a post on that 🙂

  11. Ganesh says:

    Interesting read indeed!

    Question to the forum:
    1. Has anyone experienced a situation where there was a correction in the rental rates for residential / comercial properties in India or anywhere in the World (excluding under developed economies) during the last 30-40 years?
    i.e. did rental rates also reduce with falling property prices or did the rental rates always scaled up gradually regardless of fluctuations in property prices?

    1. Ganesh

      You can discuss this on forum : .. This is pretty old post for readers to look at


  12. Vijay says:

    Very good discussion and debate on sensitive topic
    here are some points from side
    Looking at the discussion what i think is we are considering House more from Economical point. We also need to consider social angles of owing house.
    -If we are taking house on rent and moving from here and there when will we develop good relationship with neighbours .
    -You need to provide some stability to your family as well. Your kids will need some friends with which they are there for long time
    -You can form a group with your neighbours and enjoy celebrating festivals,outings etc

    Having said that I agree that one should not buy house beyond his capacity and EMI should be manageble.

  13. Praveen says:

    Hi Manish Chauhan,

    Nice topic and i am very glad that i found your site and regret i found it very late.

    Coming to the discussion i will not willing to pay rent for my life time at same time i will never take 80% as loan and buy it. I am with promod points.
    Presently i am living in leased house which i feel for my affordability its very good option. I paid 3.5 lacks for 3yrs for single bed room. Ha i am from Bangalore which is very hot in real estate now. What i will suggest is buy some land out city which has good natural resources , mainly water and good connectivity to highway . Invest your money for next 5 to 6 yrs and built your dram home when you have enough money in your hand. Once we start spreading our selves to distance away the price of land will become less. Emotionally i feel every one should own a piece of land for themselves I hope that happens.


    1. Praveen

      Is’nt leased house almost same as rented just that you pay upfront ? I agree with you the it gives an emmence satisfaction to own a house or land .


  14. Manyam says:

    Just gone threw..’s MBRI index (Makaan Buy vs Rent Index).. ..
    Any feedback on this..?

    1. Manyam

      Thanks for providing this info .. 🙂 . Its a good thing overall , but i am not sure if public will agree to it ..


  15. nitin says:

    to own a house is good and one should act smarter for example
    if you take a home loan today for 20 lakh you are using the bank’s money to buy the asset. the EMI you are paying now will have less value in next 10 years as value of currency depreciates in time.
    you can also buy home for investment as rent is increasing everyday in metro cities and will generate a handsome amount in next 10 years
    remember your EMI will not increase so much if we consider interest rate increase but the rent will increase like anything.
    after buying a HOME try to get another HOME after 4-5 years for renting purpose.
    just give a thought what you will do if all the investment you made in stocks ,mutual fund give you a huge loss ,but if you had purchased a HOME you can still have a place where you can rest and enjoy the rent of second home

    1. Nitin

      Good point , I hope you meant “Purchasing power of money” instead of ” value of currency” ?


    2. Nitin

      Yes, as far as one can use Bank’s money to fund his house and use his own money in better way , it makes sense to go for loan


  16. jitesh says:

    Useful article. Don’t have much to write except following news

    Times News Network
    Suicide due to Home Loan

    Pune: A 31-year-old man allegedly committed suicide by hanging himself from a ceiling fan at his residence in Indrayaninagar in Bhosari.
    The incident came to light only on Wednesday morning.The Bhosari police have identified the deceased as Piyush,alias Kishore Muralidhar Mahajan,of Indrayaninagar,Bhosari.
    The Bhosari police said that Mahajan had been disturbed ever since he had lost his job.

    He was finding it difficult to pay the monthly instalments for the flat he had recently bought.

    The police have recovered a suicide note which said he was committing suicide because no one was coming forward to help through his bad times, the police said.
    – TNN

    1. Great example .

      This is what I am talking about , the burden should not be bigger than your life . House is part of your life , your life is not part of your life .


  17. Deepak says:


    The overall discussion was just too helpful. Renting/buying/Real estate is a big topic of discussion everywhere. We expect some more articles on this blog on real estate investment. One thing came in my mind, why don’t you think of some post where you can ask the readers about their real estate purchase experience. Do’s and Don’ts sort of discussion. Outside world is full of builders and builders who creates lobbies, manipulate the prices(affordable is just a dictionary word), break the promises/commitments, delay the projects, alter the original price and list is endless…. You can surely ask the readers if the promises told by builders are completed or not? Lets spread awareness through this post that will help people in their buying decision. Off course people can name the builders/construction companies (in different cities) to stay away from or choose from. It can turn out as a good post, indeed.

    let me know how do you think about it?

    again thanks for this article.


    1. Deepak good idea 🙂

      I would ask people to share their experience :0


  18. Jayant says:

    Everyone is comparing RE for 20 years and don’t you see what has happened in the past 5-6 years. I think this islike living in fool’s paradise.

    The RE price bubble in India is massive and will burst with a big pop. I think all people are fools who are buying which is majority of the population. They all feel they don’t want to be left behind and make money while prices are rising as RE never goes down.

    All these price rises will become history for India in the months to come with a 60-70% fall in prices.

    Nothing can sustain on borrowed money and steroids (stimulus) for a long time. Look at all other countries that followed Keynes theory and are failing. I think Keynsianism is dead for a long time. Indian policy makers are fool enough not to realise that yet. By the time they realize, it will be too late as masses will come out on street like Greece.

    1. Jayant

      Your views are welcome , but I think they are too extreme .. the correction would happen , but I dont think of this quantam , and even if it happens , There are enough people looking for the time when prices come down and BANG!! . Demand will again shoot up ..

      Overall the ups and downs will keep happening , at the end of the day the returns wont be as high as it was in this last 6-8 yrs .


  19. Sanjay Singhaniya says:

    It is intersting topic to discuss.
    However, most of the people buy house very early in the implicit fear that if they wont buy it now then the price will be out of reach soon. More important question is whether real estate price will keep soaring at the same rate as it was in 2003-2008.
    I also went through and would like to add my two cents. People who buy property at home loan for investment are not wrong. They know that if interest rate is 10% and real estate return is 16% then they have return of 6% in the first year itself without doing any work (a concept known as leveraging). And this return of 6% keeps on increasing in % basis as home loan keeps reducing.
    More important question is whether real estate price will increase at 16% or 10% or even less. Two years of sub 10% return will make real estate an unattractive option.

    Also, instead of bashing real estate investements, I feel Manish should suggest how to enter into real estate without leveraging too much. Note that I am looking real estate only as investment.

    1. Sanjay

      Good points from your side . I will try to put down some more food for thought in coming weeks 🙂


  20. raag says:

    I just have one point to make: in evaluating/comparing most investments, we have “survivor bias”. We look at the most successful guy and say look at him – his property value doubled in 8 months. What about the guy whose property got demolished because some stupid govt wants to widen a road or build a metro. Has anyone of us talked to a person who is losing her property to road widening in bangalore? What is the worth of the TDR paper? What emotional “satisfaction” she will have? I believe real estate as an investment in India has huge legal complexities. We don’t have concept of clean titles. In B’lore, in one instance, even a property sold by BDA was disputed because it seems that property belonged to the forest dept. So, people should think from that perspective as well before putting all their life-savings into what can turn out to be legal mess rather than an asset.

    1. Raag

      Correct , you have pointed at something never talked about in this whole thread , In absence of a regulator , this space it too messy 🙂

      Would include your point in the next article 🙂


  21. drkishan says:

    hi manish
    nice spark u fired! its really a mind boggling debate. but what i could realise from ur present and last to last blog is that this shall be an unending debate. we cannot generalise on a single option since both have their own advantages and disdvantages. its like asking “is coke better or pepsi?” the answer shall depend on whom i am asking? age, gender, taste buds and many innumerable factors come into play. although its an interesting debate to go through it shall not be able to result in one single decision.
    my personal belief: it tends a bit towards owning a house. afterall when shall i enjoy the money which i may get by avoiding home loan emi and investing in MFs and getting 15% returns. when shall i consume the returns. it may be late if the real estate continues to grow at faster rate than MFs can give us returns. although it has only grown @10% rate max butwho knows the future. thus i think starting early towards owning a house is justified
    suppose i get a Lee jeans for rent at a rate of 3-4% of the cost price shall i rent it only because i can change it whenever i want or shall i buy it if its affordable. i would rather buy it. similarly i would rather buy an HP computer rather than renting an iMac @ 3-4% of its cost price. only thing is that i should not extend myself to buy an iMac when i cant afford it. its all about affordability. remember the old hindi saying”spread ur legs only as far as the bedsheet is” (pair utne hi pasaro jitni badi chadar ho). this issue was dealt nicely in the “emi disease” blog.
    i did not mean to offend any body (i’m sorry if i did). u may call me an emotional idiot or may be because i have never lived in my own house, my vote is for a COMFORTABLY AFFORDABLE OWN HOUSE preferably an independant house rather than a flat.

    dr kishan

    1. Dr Kishan

      Definately , Its an unending topic of disussion and there will be enough people in support of both arguments , however I see more people in favor of Buying a house 🙂


    2. Deepak says:

      dr. kishan

      sorry, but I strongly disagree with your examples.

      your example about owing a Lee jeans or HP computer does not at all suit here. Real estate is not something which can be bought at a price of 1000-1500 Rs. that any jeans would cost. Your examples really does not make sense. And if real estate continues to grow at such rate(around 25-30%) it will end up with BIG disaster. In that case if only few people are owing a home that doesn’t mean they will be saved from effects of this disaster. The overall economy will blast and ultimately everyone will affect from this.

  22. Guru says:

    For the current scenario, I vouch for renting. I feel one shouldn’t buy just because he/she can afford it.

    I live in a rented house in a very posh location where everything is available right next to the house. Its a 2400 sqft house where the owner lives in the 1st flr. The rent i am paying is peanuts (13k) compared the claimed value of the house. The site price alone comes to 1.64 crore ( 7k per sq ft). If you add atleast 20 lacs for construction, its close to 2 crore. There is absolutely no connect between the rent and the price of the house.

    I can very much buy in a few km’s from the place where i am staying. But I need to compromise on location, size, accessibility etc which i don’t want to do. (There is no shame in living in a rented house.). This is not the only reason why i am not buying. I work for an MNC software company. Though I am a top performer, you never know what will happen next. Anybody can be shown the door. Moro-ever, you cannot say recession is over. It might just be a relief rally.

    So what is my strategy?. I have put major portion of my savings in FD. This alone covers almost all my monthly expenditure. And part of it in MF (has been going very good results). And invested some in stocks. I lost a lot in the beginning. But i have learnt in the process and now investing in only quality stocks. Since then I have been getting good results. I want to invest more in MF/Stocks. Just waiting for that correction or crash to happen.

    In the worst case of layoff or something, I am planning to go back to my village and live on FD interest. (Obviously the expenditure will be very less compared to a city). Mo-rover I can enjoy life with-ought worrying about the corporate rat race.

    1. Guru

      Nice points . But you are missing a critical point which is a great motivator for everyone and thats emotional satisfaction and feeling of owned house , may be thats not the case with you , in which case your overall points are superb and I agree 🙂

      Keep commenting


      1. Nitin Gupta says:

        i agree with Guru’s points.
        we there is no place for emotions in finance 😛

        1. Nitin

          Yep … mixing money and emotions can not work in most of the times


  23. Anoop says:


    There are different views and their supporting arguments. All compare the prices of real estate between 20/30 years ago and now. But this decade is special. Every asset class went up like anything. Even the price of apple has gone up many folds. Another example take milk, it was Rs 7.5 in 2001 in Hyderabad, now the same is Rs 13. All this makes out comparison skewed.

    A different comparison. Take Gold, it has gone up most in this decade and much in the last couple of years. From my marriage in 2004, it is more than double – 7000 to 18000+ now. does it mean that I should start buying gold. But then the returns from gold before 2001 are pathetic. See the 10 years or more chart, then it is apparent.

    So we need to think if we compare the prices of 1995 or 2005 or 1965 to 1985 and so on in any asset class.. how they were. Was the pattern like last 10 years?? This speaks a volume.

    Many guys said that their plot/house helped them alot. But they used it more like insurance. As earlier in old days, financial literacy was very low. Insurance was not an option considered by many people, and for investment we had only land and FD, this was bound to happen. Even in the absence of investment avenues, and when only land was there, the price of land did not increase phenomenally in the last few decades as it did in this one.

    We need to ask ourselves what will the long term effect and impact.
    1. Will the price increase like this in the next couple of decades.
    2. Can we afford it to buy

    As you suggested it is best to buy when can be afforded.

    The house we stay in should give us peace of mind rather than becoming a huge liability on our shoulders. It should not paralyze us to think/do different things for a better future.

    As you say it is for every individual to evaluate this and decide for oneself which side to turn. The article and the arguments in the comments give enough food for thought to do this.

    It has been an outstanding article and followed by an intelligent debate. But saying this is now cliche`.

    Kudos to you.


    1. Anoop

      Thanks , I so much agree with your point that “this decade is so special” , Gold moved so much , and that was because of mainly rupee becoming weak in relation with Dollar , see my latest article on that .

      Overall great views from your side .


  24. Ankur says:


    Excellent discussion. I would like to highlight few points in favor of owning a house:

    1. Sense of security and belongingness – To be frank, it is priceless!! We have been living in company provided accommodation and no issues at all. However, my wife was surely not comfortable as we were not having anything to be called home. I know the comfort she now has since we bought our house. By God’s grace, we were able to buy outright without taking housing loan. So that makes it easier. I was intent to put this entire money in equity investments since we were not in immediate need of buying home. But, looking at happiness of my wife, I do not regret the decision.

    2. Inflation hedge – I recently read this story of a Romanian couple who were saving money to buy a house in countryside while retiring. After a life’s hard work & savings, they were close to be able to buy the house. Then came collapse of Soviet Union and economic crisis along with currency devaluations. Within no time, their hard earned savings in local currency was wiped out. At one point, their networth in US dollar terms was redcued to four and half US dollars. This for a life’s hard work! Obviously, buying a house on loan would have worked great in this situation. At least, they would have shelter. I am not saying that India is like Romania. However, we have experienced fairly high inflation rates. As long as interest rate on loan is less tha inflation and is fixed during tenure, it is good to take loan and buy house. This works as value (in terms of purchasing power) of outstanding debt gets reduced due to effect of inflation whereas house price appreciates in response to inflation.

    I would like to know your views for these points.



    1. Ankur

      1. I totally agree , This is one reason which should be the top most reason to buy house , women are generally more biased towards having “own house” then men in general and that has its different reasons. However this whole thing of “Satisfaction of Owing house” is very much personal and cant be generalised , there are enough people here who do not show much interest in owning a house for these reasons , may be some other reasons are their top priorities .

      2. Agreed that buying house at interest rates lower than inflation is a good idea, however if you look at long term ,I dont think in general inflation is higher than home loan rates , we have seen days of 14% home loan interest and there are all chances that we will see that again .

      Over all , this whole discussion points at one major point , and thats dont take burden of loan beyond you can take , else things can get ugly overall in your life , if you are lucky it will not , however you have lived with it , some people might not face the risk and some will .


      1. Ankur says:


        I agree with you point on burden of home loan. The EMI should be within comfort range considering current income streams. If not then it depends on luck whether one will face problems or not.



        1. Ankur

          Thanks for your comment 🙂 . Keep giving your valuable views .


      2. Vineeth says:

        Hello Manish,

        I prefer having own home or flat and somewhere i agree with Meena’s reply.
        1.More than balancing, real estate belongs to different type of asset class, its a completely fixed asset, so its worth having in anyone’s profile.
        2.Family is like a tree, branches will grow over time, so own home is perfect when we search alliances for our son or daughter in future. dont let our kids buy home at huge price, we can make it easy for them now.

        3.Risk means reward, go for home loan to maximum tenure for less EMI,every bank permits prepayment without penalty atleast after two years.When you get additional money like bonus etc, prepay it or put it in stock market if you think that will give better returns.

        4. take life cover. Also make sure your EMI is under 35% of your monthly salary.

        Not all people can buy or build home, even if they got money, its same like having child, some people dont. but i think every mans life should have this three , own house , wife and children.

        what about constructing home, two year back 12 lac home now requires 20 lac, just in two years this much difference, it depends on place to place, availability of raw materials etc.

        but i believe most of them got atleast one home in their native place, such people who stays in metros or big cities, they can stay in rented home thinking about returning sometime later in future.

        1. Vineeth

          Thanks for your views , your views are yours 🙂 . There are many who will not be confortable with your points . But you are correct from your angle, if you agree with Meena’s views , can you also comment on my reply to her .

          What are your views on those ?


    2. Vishal says:

      Ankur, inflation hedge is fine but where is the interest rate hedge? Your example is an extreme one – collapse of a sovereign power. But in conditions far less extreme, we have interest rates jumping from 7% to 15%, nearly doubling the EMI at times. This can put the borrower into a debt trap just as easily as inflation in your example ruins him.

      Actually it is worse in India. Even after taking your property for which you took the loan, if the bank cannot get all its dues, it can confiscate your other assets. Your bank account, investments, property – anything other than xPF. Have you read the home loan agreement of any bank in India?

      1. Vishal

        Is that true ? Can you give more detailed info on this ? Which Bank loan do u have .


  25. Deiva says:


    I think everybody is taking the point that M.F / Equities will 10% CAGR over a long term (when we compare against house.) I want to add a word of caution here. If we take the returns of developed markets (esp US) equities during the past 10 years i guess it is lesser. So i think having a word of caution will help here as well. If i am wrong please correct here.


    1. Deiva

      Yes, it can be the case , Last 10 yrs in US is same as 1992-2002 in india when markets didnt move anywhere , so taking these tenures would be little harsh :). But you are correct, when we say equity can give 10-12% return over long term , it does not mean that you buy a share or mutual fund and look at it and the end of 10 yrs, you have to do many things in between like rebalancing your portfolio , yearly review etc


      1. Kshitij says:


        In US the inflation wasn’t so severe….(atleast till 5 years ago). The bread they used to get at 60 cents 10 years ago, they get it at 80 cents.

        What about India, I remember buying eggs at 3 rupees per dozen…Now have bought even at 52 rupees per dozen.

        1. Kshitij

          Yes , I was not talking about inflation , but thats something to consider, the above comment is only from market movement perspective !

  26. Raja says:

    Hi Friends,

    Thanks to Manish for thinking that my comment too deserved a place in the main post. While i tried to sit back and enjoy other people’s comments here, i couldn’t resist myself long enough from giving few more points which came to my mind in the meanwhile and i think are not bought out in this discussion before. So, here they go…

    1. Often we hear people giving drastic rise in cost of flats as one of the reason for not buying. But most of the financial analysts I have heard, say on an average the real estate has not given any great return in past so many decades(May be just 9-10%). I think there is disconnect here, either we say the prices have risen and given great return (to people who bought them in past and held) or we say they haven’t given great return (meaning prices haven’t increased significantly) and hence cheap by today’s standards. How can they be expensive and yet not given good return ? Am i missing some part of the logic here ??
    Are we mistaking costly to un affordability here ? Is it a assumption then that houses were always affordable to every section of society in the past ?

    Coming to the increase in cost argument, I almost never find any mention of the input cost rise in the past in such debate? (I have no statistical evidence but,)
    How much has the labor cost increased in last 2 decade ? 900 % ?
    How much has the cement,steel etc. cost increased in last 2 decades ? 1000% ? (not sure, but i remember my family buying them in the range 20-30 some 2 decades back)
    How about the increase in cost of all govt regulation related expenses ? like STP, plan sanction, rise in corruption related cost in sanctioning all regulation related stuff…
    How about the cost associated with making the new and modern amenities that we people have got used to in the past decade like Car parking, Water treatment plant, generator, lift etc..
    How about the increase in cost of land because it’s getting increasingly difficult to get it within city limits and hence commanding a premium due to demand/supply mismatch ??

    3. Has anyone analyzed the rise in income and it’s relation to cost of a dwelling unit ?
    I mean what’s the multiple of annual income with which our father, grandfather and great grandfather’s thought of building a house for themselves ?
    Are we way off that multiple ?? to describe the point, say if my father had built a house for our family for 1 lacs when his annual income some 25 years back probably was 20k per annum.
    And the current generation may be is buying a 40 lac flat with 10 lac of annual income (multiple is 4x).
    (Again am not sure about the past data in the example, but would love it if someone can take the pain to do such an analysis and throw more light on the subject!)

    4. Guy’s i feel there is another level of bias in this debate. We all see price rise in almost every aspect. Even a minor thing like a ordinary bus ticket has risen 300% in past 7 years in Bangalore. But in case of house, since the amount is huge and the current generation wants it NOW. We tend to feel the pinch more.

    Would love to hear more data or agreements/disagreements on the above points.

    5. Only one thing where i feel the current generation gets into trouble is the relatively easy availability of loans and hence the temptation to get everything NOW. Our older generation because of unavailability of easy loan’s probably waited it out and saved to build that dream home. But at what cost ?? What was the price rise of his dream home in that period ? Was it low enough to justify the saving and then buying ? Vs our generations buying and then paying ??

    Probabaly only time can tell the answer to the 2nd part of the above point. And it’s ticking!!

    1. Pavan Kulkarni says:


      1. While your argument is bang on, you seem to have missed one key point. The returns of 8-10% that experts talk about is over a long term period (> 20 yrs). The zooming of housing rates is over a mid-term period (from around 2003-2004). Hence, the time factors are different. If the property prices haven’t appreciated starting 2003-2004 real estate may not have managed to give even these modest returns. If someone bought a house before that, good for them.

      2. I agree to all your numbers. And here is one number I give you (based on personal experiance). A builder charges Rs. 3500 to build a 1500 sft duplex house on 200 yrds plot (total = 52,50,000). I buy a plot in same area for 4k per yrd (total = 8,00,000) and build 1500sft at a cost of Rs1200 per sft (total = 18,00,000). Hence my total cost is 26,00,000. I short, the price hikes don’t justify inflation. They justify the greed of builders.

      3. I have no data to support or oppose your argument. However, I do agree that people today are over-ambitious esp. w.r.t. house. Everyone wants the best (car, home theatre, interior decoration, modular kitchen etc etc). With such thinking, they are bound to run behind costlier flats

      4. As I said earlier, any cost rise supporting inflation is understandable. The current scenario (atleast till recession started) doesn’t look like that.

      5. Strongly agree with you. However, I also think leverage is a powerful tool. Used wisely, it can return enormous profits. But pre-requisite: using wisely 🙂

      Interesting points Raja 🙂

      1. Raja says:

        Hi Pavan,

        Thanks for your reply.
        1. So, are you saying save for the property appreciation for last 6-7 years the actual return on property over 20 yr period before this 6-7 yr would be even less. Something like 5% ? I have never come across this piece of information before. May be the financial experts just overlook it out of convinience.
        2. Your point taken. But what’s the point in buying from a builder who is charging 3.k per sft ? Why not buy it from one who is charging around 2-2.5k. I live in Bangalore and find the 2 varities of builders co-existing almost in every locality (excpet the most posh locality where the land is already scarce). The big name builders (sobha, salarpuria, prestige etc…) always charge a premium of almost 60-80% over the no name builders for the same stuff in the same locality. Of course counter-arguments to this point could be they offer better and verifiable quality. But then do we always buy a Audi,Mercedes or even Santro will do the job ?


        1. Raja

          Regarding your 2nd point , real estate prices has rised a lot in this decade (2000-2010) , however for the initial 2 decades of 1980-2000 , it didnt appreciate well , so over 20-30 yrs period , the returns are just fine 🙂 or good , not extra ordinary .

          investors have to understand that this was a great bull market in Real estate and we might be near the top 🙂 .


          1. Kshitij says:

            That increase is because of the agents…earlier people used to buy/sell as part-time job. Now its their full time job (including the spin offs like PRs, DTP jobs)…so creating a hype- which failed over long time, was the agents/dealers primary goal.

            1. Yes Kshitij

              the full time job point looks valid 🙂

  27. Anjan says:

    Wow, Very good views. I love it. I am writing my opinion for 1st time in jagoinvestor but have been reader since last few months. My observations as under
    Some notes / stats first :
    – Average per annum salary of Indian is approx 40,000 Rs (ie. approx 3400 pm) as of today
    – I have seen some knowledgeable banker (or politician) mentioning that if we take only the uncultivated land (barren land) of India than we can offer 500 sq yrd of land (or 4,500 Sq. Ft) per person to every Indian (i think it was during the time when he was not happy in the way people were buying houses / land like its now or never 2-3 years back)
    – In Japan property prices crashed somewhere around 1996. Today similar properties in Japan are still 2/3 the value of pick prices. ie. 300K $ property costs 200K $ property. During the peak period (or 10-12 years) Japanese started believing that property prices can only go up 🙂
    My belief :-
    – Price of any commodity will depend on the Inflation (or the amount which government prints each year)
    – Most of the people would prefer to rent a flat which is not more than 25% of the take-home (its generally 18% to20%)
    – Thus technically if a person owns 4 house and gives it on rent and he is residing in the same area (ofcourse without loan or EMI) he may be able to maintain the same lifestyle his tenants are maintaining. If you have one more house than you can take care of any maintenance, painting, repairs, society charges etc from that house. Please note its technically and may not be practically same
    – Returns always averages out. The land which has not given any appreciation will see appreciation over a long time and it will be almost in line with other property CAGR. It may be next year or may be 20 years . I mean if sqft rate of Mumbai has appreciated from 1000 Rs to 10,000 Rs in say last 20 years. Same may be the case with a property in village. 5 Rs per sq.ft property will cost 50 Rs during same time in 20 years yielding same returns. If some property has appreciated 5% more than the normal CAGR of past 1-2 decade than one should be very cautious as growth may be slower than places which have seen less appreciation (unless there are genuine reasons like flood / toxic land etc).
    – Normally world wide in developed nation (except Asian countries) rental returns of property are around 5% to 6% (same as that of bank loan rates; with low inflation post Leman Brothers). Thus if rental returns in India is 2% or 3% than it will mean only one thing – either rent will appreciate more than property rate (in %age terms) or property price will come down and match around 6%-7% rental returns. This will again depend on how much money does government print
    – its possible that any real commodity / land you might be holding will appreciate with the same inflation rate over 20-25 years. Never hold long term Govt bond which will give always –ve inflation adjusted return unless you have got it on discount.
    Please note when I say Inflation I mean real inflation and not the figures published by Government which is 2%+ higher than what is reported by Government. Which has significant influence returns on 20 year period. I know that not everything which I have mentioned will fit in Buy Vs Rent but though of putting it anyway 🙂
    Please don’t try to kill me for my points, after all they are just beliefs and I am open for change 🙂

    1. Anjan

      Some really nice points from you 🙂 . Great contribution


  28. Praveen says:

    My feelings to on buying vs Rent fluctuates.

    1) In my hometown My father bought a house in 1996, and if we compared with market rate in 2004 it didn’t appreciated atleast with CAGR of 6%., but from 2004 to 2009 it became 20 times. But the price stayed stagnant from past one year.

    2) When I see the transit time in Bangalore between home & office sometimes I feel its better to stay in a rented house near to the office because generally we will change company every 3/4 years. It may be better to rent out house if we own one and live in a rented house near to office but emotionally its impossible to stay in rented house if you own a house in the same city.

    3) I had an colleague who gets 50k as take home salary but pays 20k as EMI for house bought in his home town (where his parents live) and pays 8k rent here. He is compromising with his lifestyle in many aspects.

    4)If we see property rates in Bangalore there is no YoY growth of atleast 10% from mid 2008.

    So either argument (rent vs buy) is not deniable.

    May be the best way to invest money is to invest in equities from 1994 to 2004 & withdraw that money and invest in Real Estate from (home or land) from 2004 to 2008 and sell the property and invest it in gold in 2008 🙂

    1. Haha

      In your last sentence you said what one should have done 🙂 to get the best returns 🙂

      I agree with you that any decision would be fine considering a person situation and his life style .


  29. Akshay says:

    Its a really interesting discussion. Friends but never forget there is a bubble building up in the real estate sector. One of the factors that lead to this recession was the bubble burst in real estate and cheap lending from banks which lead to people go for more then required homes (or loans whatever type just because they were available). Staying in Lavish homes is pleasure no doubt but need to think is that really affordable to me.

    In India we do not have any governing authority over real estate. Hence the prices we see are just a mere supply demand chain and more so controlled by the powerful builders and politicians.

    We need to understand that the real estate if becomes unaffordabale it will be for all. So there will be no demand. But for supply of flats and appts. they will always be there. This will definitely lead to the prices falling down.

    So just wanted to say do not jump into the wagon as everyone is doing so. Check out how much you can afford, have a decent liquid amount (as real estate is illiquid assest or liability again controversial depending on situation and external factors) for emergencies and then buy a home.

    Staying in a rented home has its disadvantages but the trap of owning one is also high.

    1. Akshay

      Yup .. We really need a regulator for Real estate . The other disadvantage is tax evasion in india .


  30. ManishJ says:

    Nice RENT OR BUY calculator… assume $=Rs for sake of calculation

    1. ManishJ says:

      Don’t forget to adjust “Advanced Settings”

      1. Manish

        Thanks .. good one , do we have something of Indian context ?


  31. RAJAGOPALAN says:

    I just went through the comments and ideas, I really had no idea., No pain in not owning or living in rental house., Hence unbiased.,

    I found three things.,



    LIFE SAVER in difficult times.,
    investment need not be in house property., A good investment is one that is having greatest liquidity and protect you from inflation.

    satisfaction is again cant be from mere ownership, but the status, comfort and ones intimate requirements fullfilments.,

    life saver, As Mr….. from pune said., not bought a house, lost in stock market all money., buy a apartment in COIMBATORE., three floors went underneath the earth(built on POND LAND)., the EMIs are still pending., No god can save them., none of the house was insured.,

    Going what is written above., A house property worth it., only if it is just within the financial reach, and the income is stupidly lost in bad investments and no idea of how to save., rather invest., and do not count on future requirements.,

    You buy a house., and your kids were thousand kilometers away.,
    You save today for your retirement life., you are always with them., with your handsome pension without troubling them.
    You buy a house., (when you do not know what to do with your saving), It will certainly save you and your family members, when your poor in financial mathematics.,

    Thanks everyone of you., I was unable to put alll these in words these many days., You all prov-acted me and its here.,

    1. Rajagopalan

      Thanks for your views , An asset with great liquidity and providing better returns than inflation cant be a safe one in short term atleast , House , Equities are example of it , I am not sure if thats how one can define an asset as “Greatest” , it would depend . for some one FD’s can be best .


  32. Harish says:

    Very interesting conversations that cover a range of thoughts and emotions. I tend to think a bit conservatively. If you can see the funding for a new house with the present income level, then go for it . I am a positive person but if the industry doesn’t perk up then I would be lucky not to have a pay cut let alone an increased future income —this is from the software reality show we have seen recently, two of my friends ended in distress sale. If you have a steady income even after retirement like pension, then go for it. For the extravagent who love to challenge the future and gamble, think of your parents, inlaws, siblings- take an opinion and if you feel secure then jump.

    1. Harish

      I agree that extravagant people can buy houses which are even out of their reach as its a good way to control themselves and teach some value for money


  33. srikanth says:

    well i love rented flats… gives me freedom to move to any location i want to live in. Buying a flat would always take you to the remote locations of the city. Agreed the prices would go up, there will be better returns(although there is as much risk involved in it, say the area you bought your property some home just didn’t blossom).

    1. I don’t want to be locked down to one place or one city for the rest of my life.

    2. I don’t want to live in remote areas with not so great facilities.

    3. After a while you tend to grow tired of the house you live in. Change every now and then is refreshing… 🙂 trust me on this there is no PERFECT home on this world.

    4. I don’t want to be pressurized with EMI for 20 yrs of my adventurous life. Would prefer having adventurous freedom to a house any day. Emotional freedom.

    1. Srikanth

      My views are very much like yours , however i am also biased on the emotional satisfaction which people get in owning a house , Is it not a case with you ? Why ?


      1. srikanth says:

        These are the reasons.

        1. I don’t want to die with millions in my Bank account.or with huge assets like a house.

        2. Most important factor i don’t want to be known as wealthy man, i want to spend every penny i earn before i die….haha.

        3. I get bored of any house in max 5 yrs time, architectures would change dramatically and i would have to spend a lot on it to revamp it. I much rather rent a new flat ;).

        4. I want my capital to be with me to have the room to make mistakes in life. 🙂

        Now my task is to be smart with my money so that i dont go bankrupt before i die. 🙂

        1. Good ones 🙂

          However point 1 would mean you are not looking to leave any legacy for your Children , which again is ok :0


          1. Kshitij says:


            I know this is a very old post…just that it doesn’t mean he’d leave nothing..even if he saves 500-5000 per month, he can leave the cash behind…
            Imagine if he leaves a house and there is dispute about who wants to keep the house and who wants to take away money (or who gets which part or if they have to sell the house- that would be an unknown after 20 years leave alone 50 years).

            So I feel better leave cash which can be divided…


            1. Kshitij

              Thats one opinion. Leaving a property means its a asset which will keep appreciating which will increase in worth + it will not be used/sold .

              If cash is left, it will surely be evaporated. anyways its a personal opinion !

  34. nandish says:

    Hi Readers,
    Manish is a very dear friend and with his alignment I am expressing my views on Real Estate. I am into Financial Planning and Real Estate Business. I also have my major family/personal investments in Real Estate. I see Real Estate as a Business which is all about “making a deal”, whether it is buy/rent or developing properties.

    For me Real Estate is an “Opportunity Asset Class” and I would like you all to focus on making money from real estate and not getting stuck with Buy or sell syndrome. I have met people in life who design and sell islands to the rich and the famous.

    According to me some investments are made for our personal happiness and satisfaction and not just for returns. Honestly speaking we feel secured and happy in self owned Property. Even Birds make their Nest very beautifully to have a sense of security. All those people who generally cant buy/afford home are in the favor of staying on Rent and they make entire world wrong who go for a purchase.( Be Honest at this point, I would not say all). We Indians don’t have Rental mindset be it car, home or any other thing WE WANT TO BE OWNERS.

    Going beyond the buy/sell syndrome this is what I have to SHARE:

    Buy your house in Time:

    Buying a home is probably one of the single-biggest investments you make in your lifetime. Sooner the decision you make the better it is. Remember everything keeps appreciating except the value of rupee. If you buy the house you need, in time, you are automatically hedged against inflation. Do you not realize that a house costing Rs.50,00,000 today could have been very well purchased by you for only Rs.10,00,000. If you had then parked this money into a deposit fetching you 8% interest per annum (net of tax), your investment would have just doubled around in 10 years to Rs. 22,00,000 and you would now be required to dish out an extra Rs. 28,00,000 for delaying your decision.
    Look at real estate as a passive money making instrument.

    Be a Real Estate Landlord:
    I have a client who buys property smartly and puts his property on Rent to Bank ATM’s only. He has 17 such ATM centers and earns huge passive income.
    If you invest in real estate today and become a landlord, you will be happy to know that rents are subject to inflationary pressures as well. You have the capability to raise your rental earnings when the cost of living goes up everywhere.
    Moreover, it is not just return on investment that you target. You can also avail the benefit of appreciation in the value of your property.

    I come across many clients with a Question I am not going to live permanently at this place shall I rent rather than buy a house?

    For such people it may “Rent” may turn out to be a good strategy.

    That may be a good strategy because let’s say you buy a house and then have to sell it within two to three years. The various buying and selling costs alone will probably be a significant amount of money. Will the house have appreciated enough to cover those costs? It’s possible, but not likely. Besides,In the first years when you’re paying off a home loan, your payments are mostly going towards interest, not towards paying off the principal balance.

    So, after living in the house for only a few years, you’ll probably technically own just a tiny part of it. Renting is always an option to consider. It’s true that home loan interest is tax-deductible, and it can be cost-effective to own rather than rent. But, if you’re renting a place for considerably less than you’d have to cough up in loan payments, you might invest the difference and watch the corpus grow.

    So check where you are, what suits best for you and make a move accordingly.

    Nandish Desai
    Financial Planner

    1. Nandish

      Thanks for your insight on this topic


  35. ManishJ says:

    If flat prices/interest rates are increased from current levels, it may go out of the “affordable limits” even for the “well-to-do” (or thought so) IT couples.

    Please keep in mind that prices in most of the Tier-I,II cities have touched or exceeded the peaks before the 2008 recession times. Any price appreciation from henceforth may be very tough, at least for few years down the line.

    Only people currently buying flat/land are most likely:
    1. NRIs returning home and they also have to cough up substantial part of their foreign currency savings.
    2. Business guys – may have lots of black money
    3. Higher management in companies

  36. Praveen says:

    My experience on “why living in an own house is better than a rented house”:
    – I used to believe that a rented house is always better to live since I could rent a house next to my work place and avoid the commute. I did this for several years. During these years I found that I was not enjoying the place as much since I could not setup the house or invest in the interiors the way i like it. This forced me to look for a place myself and do it the way I want and 4 years since then, I should say I am extremely happy with the decision. I cant articulate the difference quite well but clearly a house that you live is more than an investment – treat it differently.

    Also, here are some advantages I see with Real Estate as an investment:
    – Fluctuates much less than equity market and is mostly reasonable to understand
    – Over long term the returns might not be as attractive as stocks but does not require as much time to be spent on them
    – Currently, India is a blooming economy and fixed assets are prudential investments
    – creating a decent percentage of our retirement income (or financial independence) from rental sources can be useful

    The key is to create a right asset allocation, but in India today it has to be part of the “pie”, even better if it’s the house you live.

    1. Praveen

      If some one is looking at infaltion indexed returns in long term ,House is a good asset to own , In short term its more of volatility which will drive the price .


  37. Pavan Kulkarni says:

    Great discussion! Thanks Manish for sparking it off 🙂
    We seem to be ignoring one major point here (atleast I don’t seem to find it mentioned by anyone)! The comparison between buying and renting also needs to be factored on what we are buying. Are we buying a flat? If yes, then we are only buying a piece of building & a minor part-ownership for land. A building always depreciates (or at least doesn’t appreciate in comparison to land). End of 15 or 20 yr period, what is that we would have paid Vs what would be its value?

    Once we reach retirement, will we able to maintain this piece of building (either flat or independent house)? One would need an additional stream of income just to maintain it (repairs, taxes etc). In this scenario it is not just about expenses but also about physical ability to look after your piece of building. Even in case of expenses, consider inflation and we need to figure out if we can have the regular stream of income for that value. And if that regular income is needed where will we go? We need an additional passive income source.

    Will you be able to sell it out? Tough question to answer! The flat culture has caught-on in India only recently (2003-2004). Before that, I believe, only major cities had heard of flats. In one of the replies someone mentioned that next 2 yrs 15000 units will be vacant in NCR area. What happens after, say 30 yrs? Will flats still retain their value? Land will definitely (and inturn independent house will) coz land is limited. It can’t scale vertically. Flats can. Ambitious builders can put up 20, 30, 40 floor bldgs (based on demand, probably). Do we see a supply-demand gap?

    These are few questions we need through thinking before we take a decision. My personal opinion is buying a plot/independent house is better than renting a flat/house. And renting a house/flat is better than buying a flat.

    1. Pavan

      Good point , I am not sure how much valid is your point for 15-20 yrs , as we already have houses flats in Pune and Mumbai which are already 20-30 yrs old , but your points are valid if you take 50 yrs in consideration . No one knows today what it will bring in , considering the bad quality of construction which a lot of investors are facing .

      Good point .


  38. kshitij says:

    I don’t know the outcome of this post, kind of surprise for me too, buy we’ll see what the analysis will be, I am trying to compare the renting vs buying by considering the house as only an asset. I am making some Assumptions.

    1. Although I’ve seen 12-15% return on property, I’ll assume 10% return as mentioned by you in the article.
    2. I’ll assume 13.5% return from stock markets (as you mention they’re around 12-15%, I’ve taken the average of them).
    3. The rent of a house increases 10% per 11 months.

    Comparison between renting and buying
    1. When you buy the house for use not for investment i.e. you won’t sell it still it gives you a heap of money which you can use when in need, but taking a house on rent also leaves you with extra cash which is EMI – rent. So here both renting and buying score equally.

    2. When you buy a house you’re forced to pay the EMI but when you take it on rent usually you don’t invest the spare money on regular basis, this is a common human tendency. So buying a house forces you to invest the money in house while after taking it on rent you usually don’t. Buying the house has this point in it’s favor.

    3. Even if the prices of house appreciate by 10% pa in long run, it’s a less risky deal than investing in stocks. Let’s say stocks gains are 13.5% and 70% people make 20% gains annually but 30% loose half of their money to give rise to this average. In this scenario house is less riskier as it’s easy to invest in, you don’t have to choose from many available options, just buy a house, it’ll be used for living and also will appreciate with time as compared to stocks where you’ll have to choose from many available options and can also fall in those 30% people who book loses while with house you won’t loose money.

    4.. For a house costing 40-45 lakhs the rent is around 12000 pm. Let’s say the house is of Rs. 45 lakhs, it’s rent is Rs. 12000/- pm and the EMI if you buy it is Rs. 30000/- pm for 20 years(can you please give me a more accurate figure for EMI, it’ll result in more accurate results).
    Here if you take the house on rent you’ve 18000 Rs. to invest, let’s say you invest them in stock market to have a gain of 13.5% annually while your rent increases 10% per 11 months. If you buy the house you’ve to pay 30000 per month that’s it and the house gives you gain 10% per year. Let’s calculate how much you’ll have after 30 years and how much will you spend.

    a. When you buy the house
    Spendings: 30,000 * 12 * 20 = Rs.7,200,000
    Gains: 4,500,000 * (1+0.1)^20 = 4,500,000 * 6.7275 = Rs. 30,273,750

    Profit = 30,273,750 – 7,200,000 = Rs. 23,073,750

    b. When you take the house on rent
    20 years = 21, 11 month periods + 9 months

    Spendings: (12,000 * 12) * [(1+0.1)^21 + (1+0.1)^20 + … + 1.1] + (12,000 * (1+0.1)^21 ) * 9
    =144,000 * 80.4 + (12,000 * 7.4) * 9
    = 11,577,600 + 799,200
    = Rs. 12,376,800

    Gains: (18,000 * 12) + [(1+0.1)^21 + (1+0.1)^20 + … + 1.1] + (18,000 * (1+0.1)^21 ) * 9
    = 216,000 * 80.4 + (18,000 * 7.4) * 9
    = 17,366,400 + 1,198,800
    = Rs. 18,565,200

    These Rs. 18,565,200 is your pure profit here but you’re also spending 12,376,800 – 7,200,000 = 5,176,800 more.
    So your net profit in case of taking a house on rent will be
    18,565,200 – 5,176,800 = 13,388,400
    As you can see if you compare monetary wise the gains from buying a house are more than gains from taking one on rent.

    Points 2, 3 and 4 when combined strongly indicate that you should buy a house rather than taking it on rent.

    1. kshitij says:

      My last post had this mistake in calculating the gains with 18000 rupees I wrongly took the appreciation to be 10% instead of 13.5%, the correct calculation yields

      Gains: (18,000 * 12) + [(1+0.135)^21 + (1+0.1)^20 + … + 1.135] + (18,000 * (1+0.135)^21 ) * 9
      = 216,000 * 111.70 + 108,000 * 14.286
      = 24,127,200 + 1,542,888
      = 25,670,088

      So your total profit/savings from taking a house on rent will be
      This was a very rough calculation because if you keep 30,000 fixed in both the cases you’ll see as the house rent increases you’ll not be investing 18,000 per month in fact after some time you’ll not have anything to invest as the house rent will go beyond 30000. So buying the house will be a winner by some distance if you do proper calculations( I suck at maths 🙁 )

      1. Ganesh says:

        Also you have not considered the increase in EMI due to interest rate changes. If you are assuming a fixed rate loan, then it cannot be just Rs.30000/month, must be more than that.

      2. EMI would come down to 43426 , which would drastically change everything ..

        Apart from it , you have not considered a lot of things like maintainance and bad liquidity which are also of concern .

        1. Manu says:


          I would like to point to one very good elaborated article with all the calculations by Deepak

          But this article is based on todays situation. Once the DTC comes in and the tax benefit of house rent goes away but tax benefit on home loan still there . What will be the better option than ?

          1. Manu

            yes . thats a nice work done by Deepak 🙂


  39. kshitij says:

    My this post is about non monetary comparison between owning and taking the house on rent.
    1. If you feel fully satisfied and feel that the buying the house was worth the money then this reason alone is enough for buying the house no other reason is required, on the other hand if you feel happy by taking the house on rent then it should be enough for you to rent it, it’s up to you in what you feel happy and satisfied but most people feel happy by buying the house as the money they are spending is actually going for owning something not merely using it.. human psychology you see 😀

    2. If you’re very much settled in the sense that your job location won’t change for next 20 or so years then it’s better to buy the house as it’ll save you all those hassles of searching for the new house, then moving your stuff and that unsettling feelings which comes from moving to a new house whereas if your job location changes frequently from one place to another, you’re bound to take house on rent some day as you can’t buy a house at every place you move 😛

    So in the above two regards it depends what gives you more pleasure and what is your lifestyle.

    1. Kshitij

      Agree with both of your points ,you hit the nail on the head 🙂 .


  40. MG says:

    One important points which fits in the equation is the future outlook of the jobs. I think majority of the readers who has the confusion of buying/Renting are from IT background who are thinking is it worth to pay +25k EMI or 40-50Lakh for a 2/3 BHK Flat. If we assume rate of increase in the Pay per year remains the same ( cannot believe 30-50% raise when someone jump ) for next 20 years, It is mostly a Go to next level discussion.


    When making any decision , I think it would makes sense to include below points somewhere in mind or paper..
    a) Do not forget the 2001-2002, 2008-2009 Recession. Remember the Pay cut, Extra burden of work, Stress, Layoff ……
    b) Where do you see yourself 10 years down when you reach 35, 40, 45 Years and whether you can cope up with the Competition from younger generation/Cost Cutting strategy of the Employers
    c) How does some of the life priorities like Emergency/Medical Contingency Plans, Children Education Funding , Their Marriage, Your own Retirement Plans looks like… What are the impact of owning the home when compared to these plans…

    1. MG

      Nice points to think about , you have raised the points which one should take care while planning , most of the people do think about all the things you have mentioned , but its more at superficial level and not jotted down on paper and thought in detail .

      Good points 🙂


  41. Prasanna says:

    Hi Manish,

    A wonderful topic to discuss about. I was always of the opinion of buying a house & I finally booked one last year. I am expecting possession next month and this is when I started realizing that this wasn’t the wisest of decision. It was all emotions during making of the decision. I am still 30 and have a long way to go.
    I was’nt really convinced about my decision but after I answered the poll created here, I got most of my answers :). I very much agree to the point about the 3-4% returns in rent.
    Manish, I have a difficult question for you here. I know very well that I really dont need this house at this stage.
    1. Would it be wise to sell it off if I get a decent price and invest the same to have a much balance portfolio??
    2. OR rent this out and continue to stay in the old house for which I would shell out around 40% of the same rent. This option is not a concern as the old house isn’t that small either except for the location. Will certainly be difficult from emotional point of view 🙁
    3. OR Forget it. Just take it as a lesson learnt Start fresh & define a time frame and work immediately towards rebalancing my portfolio??


    1. Prasanna

      Have a house which is not becoming a burden is a good thing to own , make sure you already have a good amount of emergency fund so that you dont have to sell it off in bad times .

      You have not mentioned your city , depending on that , one can say what would be a good move , I would say keep it and once you find good price for it , and your CAGR return cross 20-25% , sell it off and reenter again in bad times , Short term buying and selling is the best way to make good money in Real estate , unlike Hold and buy in Equities , it does not work in Real estate 🙂


  42. Vikram says:

    Hi Friends,

    Thanks for sharing this information.
    Manish – is it advisable to purchase a Independent house in a small town for 13lakhs of 2 bhk 180 sq yards.

    Is it suggestable to purchase If we go for downpayment of 6 lakhs and rest going for bank loan and clearing the loan tenure in 5 years of time.
    If we have contingency fund of 3 lakhs also considering this , please share some light on this , how you see this case of mine of whether to purhcase a house or stay for rent paying 4k montly.

    Please do share some light on this friends you too as well.

    1. Vikram

      Which city are you in ? Flat of 13 lacs does not mean its cheap , It may happen to be expensive for your city , look at what are the prospects in future in your city , I would say if it fits your budget , you can buy the flat, loan of 7-8 lacs should not be too much burden , go for it .


      1. vikram says:

        hi Manish,

        Thanks for the response.

        Its in Hyderabad and the independent house is located 40 kms far from City (Hitech City) but its very near to MMTS Station. Lot of express trains as well started in this route.

        The Independent house is just 1km far from this MMTS Station, though the MMTS hasn’t yet started , but might be in 1 year the services will start.

        Please share your thoughts.


        1. ok , I still cant say if its cheap or expensive , but as far as you are using it for primary residence and are happy with it , i would say its fine 🙂


  43. allthecrap says:

    Really a nice thread Manish. I would like to ask, is assumption by promod is right that rent is 3-4% of value of the flat. I think it should be 6% .

    1. Allthecrap

      Actually most of the cities have rent in range of 3-4% only , places like Mumbai can have rental yeild of 6% and commercial properties across cities might fetch you 6-8% rental yield .


      1. Pradeep says:

        Rental yield would be a bit more if you include the 30% standard deduction (20% in new DTC ?)

        1. Pradeep

          hmm.. We are referring to rent received / Value of house to be the rental yield, what you are saying is that will lead to less tax outgoing . Right ?


  44. Hi,

    One thing which many have not discussed is when you own a house you tend to spend a lot on furniture to every other thing to dress it up and maintaining the same. Whereas in Renting people make minimal expenses or rather live simply:) nobody gets interior done for a rented house.

    Similarly to a rented flat lots of expenses dont happen.

    Also with the current scenario and a moving world i see many people in the IT field r moving cities so its difficult to understand which place to buy a home.

    So ideally till one is not settled about the immediate future – Renting is a good stop cap arrangement.

    Also why are not people discussing the option of owning a home say 2 bhk and renting a 3 bhk till one is not comfortable buying one ?

    So alternatives using a rental setup and owned house could really be interesting.

    For the record i have a long term 3 yr lease on rented home 🙂

    1. Nooresh

      Good points from your side .. The best part was that if people do not have their own house , they tend to spend less and live simply which is something does not happen automatically even if people plan to 🙂

      What are the advantages of renting a house and also owning a bigger one ?


  45. khalid says:

    Buying a House is more beneficial than Renting. I have many examples regarding this. My friends who had bought their houses some 20 years back are more satisfied than me as I opted for a rented house and still living in here and now as prices has gone to sky high so its gone out of my reach.
    So this my personal experience.

    1. Khalid

      This example alone does not mean Buying becomes better or beneficial than renting , There are enough instances where it can be shown that buying is better and many more which will show renting is better. So give some calculations , analytical/emotional justifications


      1. Manyam says:

        Hi Manish,

        Really good / controversial / emotional / spicy debate … My thoughts are more biased for owning a house than rented but that should be at affordable range … and should not behind the costly areas and filling the house with costly furniture..etc…

        Let me share my own experiences on rentals:
        Exactly 10 years back, when I am staying with my friends in Hyderabad, we used to pay 1500 INR per month 2bhk – Cost of new apartment similar unit is less than 3 Lakhs…
        Exactly six years back, the same apartment we paid 2800 INR per month – around new aptms costs around are 5-6 Lakhs..
        Now one of my friends living in the same apartment with his family and paying 14000 INR per month (since he is old tenant, nearyby aptms now charging rent range 18k to 20k) and new apts cost around the area are > 50 Lakhs.. I guess the currently staying aptms would be appreciated at least 35 Lakhs if the owner wants to sell off now.. (I don’t think will come at this price but let us say coming…) but 3 Lakhs to 35 Lakhs in 10 years is really good appreciation..

        Another story with my brother, He has taken a 2BHK aptms, almost out skirts of the city (at the the time of taking)… around 4 Years back (not completed 4 years) – Cost 14 Lakhs.. he was paying around 4500 INR rent before moving into that aptms.. At that time, we thought it is a foolish decision and tried to discourage him.. as he is moving away from current place.. and need to pay 11000 EMI for his loan amt.. Now the flats around the area >35 Lakhs..(min) 2BHK and minimum rent in that area is 12000 INR per month..

        I am not going to say same story will repeat with every one.. but my idea is good to have own a affordable house with affordable price with simple furnishings.. etc.. we should need a real estate property not for investment, but for current and future social security to the family behind us..

        Best Regards,

        1. Manyam

          I agree that having a own house is great satisfaction and a person should do that considering they can really afford it , no doubt about it .

          thanks for sharing your story 🙂


  46. Dhiraj says:

    Excellent post and superb discussion thanks 🙂

    1. Thanks Dhiraj , keep commenting

  47. It’s Really Controversial!!

    I would like to share one point that may impact the thought process after introduction of New Direct Tax Code:

    It is expected that taxes on second home/flat will be app. 6% every year. (Event if it is lying vacant)

    How it will impact you as a tenant:
    Currently across India average rental is below 3% yearly of property value & taxes on property are .5-1%.

    So increase in taxes may mean increase in rental.

    1. Hemant

      Is this 6% tax on property market value ? If a flat value is 50 lacs and lying idle or is rented , do the owner pay 6% which is 3 lacs as tax ?


      1. Ya Manish approximately 6% of property value.

        Affording 2nd house will be tough.

        1. Hemant

          That is now changed in the revised DTC . Actual rent will be taken now


  48. Santosh says:

    interesting threads indeed. I agree with most points with Pramod here.
    While everybody would have their own views on the topic, I will talk from my observations. I am an entrepreneur & meet many people who at times are potential employees for my start-up venture.
    Now, most of these house-owners even if they are “excited & thrilled”, don’t join a start-up which would offer them great earning potential in the future because of the uncertainties that a start-up job brings to their income. Simply because they have a huge liability!
    If one factors the cost of “forgoing” the pursuit dreams, I guess there can’t be a bigger liability than owning a house on loan. I have seen people getting stuck in wrong jobs where they sacrifice their long-term future by satisfying the urge of saving the rent.
    And yes, you don’t decide to pursue a dream of start-up or a job-switch by thinking extremely hard on it. It just happens that you are not able to take the job anymore. The last thing one wants then is fear of home-loan coming in way.

    1. Santosh

      Yep , this is exactly what i was talking about in the last to last article . Investors have to really decide on how much they want HOME loans EMI drive their life decisions , some choose to get so much of debt that they stop living their life in the way they want , it stops their risk taking ability and all they are doing for a number of years is to manage for the EMI and making sure its consistent .

      I would say people are too obsessed with buying home these days ..


    2. Namit says:

      Hi Santosh,

      In what field does your startup work in?

      I want to work in such a startup or might as well become an investor/partner?



  49. Krishna says:

    HI Manish,

    It’s very interesting to read the conversation. Also you are trying to convince and make them understand the reality of paying high EMI on home loans. Many people not aware that how many apartments will survive after 50 years of time. I have heard that if the building condition is not good, they would have to destroy and rebuilt it. I am not sure about it.

    I would strongly recommend to put your money on land with house, in that case you would buy villas. That is more valuable and good investments too.

    Please readers, understand that the real estate is too priced. It is not the real value. We have to analysis many factors before putting any investments.

    Manish has done really very good analysis and he is talking from the heart. I too a blogger writing about the personal finance.

    Manish, you could better write another article explaining the total money paid while their completing the home loans. It would have been the double the rate of apartment price.


    1. Krishna

      You have raised a very nice point , which many people do not understand and think about , even its a new thing for me . I am really thinking about the buildings and their conditions 50 yrs from now ?


      1. srinivas says:

        Life span of individual house is 100 years and apartment is 65 years.
        You may not get decent returns , if you invest in apartment after 50years where ever the location is.right?

        1. Srinivas

          50 yrs is too long to comment on returns .


  50. Manish says:

    Hi Manish,

    I was eagerly waiting for this article on Jagoinvestor

    Here Comes my points,

    1) I know 5 people(Seniors in my company) who started their careers around 4-5 years back. 3 Of them brought a flat in Pune(as they had no knowledge of equity) . 1 invested in MF but still not able to meet Property returns in Pune because of his poor selection of funds . 1 used to aggressively trade in equities and had lost 70-80% of what he had earned in his job in 2008 Crash and now living in a rented flat. Three people who had brought flat ,out of them 1 will be completing his Loan amount in next 3 years as he prepaid major amount(loan amount was also not much) and Now looking for second flat. His flat also appreciated by 18% CAGR( he has flat in posh area of Pune -Deccan) . Now tell me who created wealth.

    2) My father had sold his 1800 sq fleet plot(3 sided plot) in delhi in 1975 for 20K to support his brother family . Current price of that plot is 2.5 crores . I dont think any stock ,MF investment of 20K can gen rate 2.5 crore in 35 years.

    3) I had personally seen the life of a tenant as I give my house in delhi for rent(from last 20 years). I knew a tenants goes to lot of stress and their main objective is to have their own a flat. I asked one of them why u take so much stress for not owning a flat . he replied I have 1 year old child and my wife is also not well If tomorrow u ask me to vacate dis flat in nxt 1 month it will be very difficult for me to search a new flat. He replied paying Home loan EMI and interest is better then paying rent as in former I have a satisfaction that after 15-20 years this flat will be mine. I really feel very happy and empowered when my tenant say to me next month I will be vacating ur premises and moving to my own flat. feel happy to see happiness on his face.

    4) I started my career in sept2008(Lehman declared itself bankrupt in october) and first thing i did with my 5 months salary and other savings was to buy a plot in very remote area of Jaipur which yielded me 80% profit in just 10 months. I dont think any MF/stock in dat time gave that much return.

    5) Now Why Im so much in favor of buying property .

    My father died when i was a year old(1985) leaving his wife ,2 daugthers,me and a 900 sq feet house in delhi. My mother never went to a school so she was not able to find a job . So my mother decided to give 70% of our house on rent. Our monthly expenses was supported by rent and When it was time for my sisters to get married . My mother sold 900 square feet house we had and brought a 450 square feet house and rest of money was utilized for my sisters marriage and on my Mother’s medical expenses. My mother also passed away in 2001. and I took admission in Engg. Some part of engg fees was supported by rent which i got after giving my 450 square feet house.

    So Rent paid a major part in my family expenses. Now you can imagine what my life would have been If my father had not brought property. I believe one can give a beautiful gift to his child by taking some stress and buying a property.

    5) My sister was diagnosed with a tumor (last stage in 2007). Due to which my sister’s huabnd sold his flat and moved to a rented flat and money was utilized to meet medical expenses. Mediclaim was their but Again property acted as a LIFE SAVOR if he didnt had a flat just imagine how he had meet the medical expenses.

    I have some more major points to add i will add them tommrow


    1. Nihal says:

      hey all,

      i read all comments.

      buying a home, is definitely most people`s dream, and, it is immensely satisfying for most people to realise this dream.

      coming back to the q. whether to rent or buy, i definitely think, that, when u buy a home, u create an asset, besides once u retire, u dont hve to pay rent to any 1 else, so in that sense, its good.

      buying a home as an investment by paying emis, may not b a great option, as u may find urself in a debt trap, but then that depends on how much debt a person has taken vs his income, so it is a something, which will vary person to person.

      i think, real estate prices in india r gng to go up as days pass by. and thus, even, if some 1 buys a property with the hope tht it appreciates, chances are high, that this will happen.

      bottom line – do not keep all eggs in one basket, so its wiser to invest into quality assests like – equity also, along with some debt instruments like ppf.

      a well diversified portfolio is better, just like a balanced diet, where in you eat carbs, proteins, vitamins, etc. in proper quantities.


      1. Nihal

        thanks for your views , I agree that a person should diversify his investments across different asset classes .


    2. Manish

      Nice to hear your views, Its clear that property in your case has helped you and your family a lot in life and your examples are also in favor of buying a property , however we can not generalize it , as their are enough people here who have their own justification of why renting is better and many people who are in debt trap and facing issue in life because of the same “property” . So i would say it differs from situation to situation and its a personal thinking based on personal situation .

      What do you say ? can we generalise that buying a property is the best decision compared to renting in every case ?


      1. Manish Awasthi says:

        I agree This is controversial topic and views will depend from person I too say,
        But Suppose if a person pays 12K rent(2BHK rent in Magarpatta,Pune) and both Husband and wife are working Then in that case i believe buying a loan and paying EMI of 25-30 K will be better …atleast then one has satisfaction that after 15-20 we dont have to pay any EMI or rent .

        In some cases might renting will be better if rent is around 6-7K . But Manish Like i said above I have seen the life of tenant. They also goes through lot of stress .

        So stress is in both case then it will be better to take risk and buy a property rather than being in stress in rented property.

        Property is the best gift One can give to his/ her children and One can also go for reverse mortgage in case you dont have sufficient fund for your retirement

        Manish Awasthi

        1. Manish

          Overall you are saying one should do what they feel happiness in and feel comfortable with , you are biased on Owning , because its your nature and the way your think . But there are many who will not agree than there is stress involved in renting, they might actually say that there is more stress in owning as you have additional issues with mantainanrce and what happens suppose there is an earth quake , you will loose everything .. though this is extreme example, but people can give examples of things which favors them

          As you said if husband and wife are earning , they can go for house where they have to pay EMI of 25-30k for 20 yrs .

          You must note here that the reason you are buying house is not because there are two poeple who are earning , its actually “Because you really want to buy it ” , even if one was earning , they would have managed some how and bought it at the end, we do things which we want any how . also paying EMI for 20 yrs and paying EMI for 200 yrs wont be much different from the value of money point .


          1. Piyush says:

            I am not really an expert, but just thought I would pen down my thoughts on Manish’s points:

            1. This seems to be a case of too short time period comparison. There have been periods of bull and bear phases in all asset classes. For example, if you compare gold returns in 2009-2011 period, it probably would beat the Pune flat’s return. Similarly, sensex nearly doubled from around 9000 to around 17000 in last two years. The right way to compare would be to look over much longer periods of time. As for the case of people losing money in direct equity, it was a case of random investing without adequate planning and one long bad period (2008-2012). I am sure people would have been singing a different tune after 2003-2007 equity bull run.

            2. Fabulous return for sure. Not sure if that is individual case or a general scenario. However, in the long run, real estate prices cannot rise faster than inflation or earnings growth, or it will outpace income and hence affordability.

            3. Agree on this point. However, I have a counterpoint. Suppose one has bought a flat in Mumbai for 1 cr with 75lakh loan (And this is normal, may be even cheap by Mumbai’s standard). His EMIs will be close to Rs. 80oo0. In case he loses his job, how will he pay his EMIs. Also, given the downturn, how many high paying jobs are available in the market? Even disposing off the flat in this sluggish market will require lot of patience and maybe fetch below quoted market price. Isnt that a big stress? In fact, its much easier to get a flat on rent in less than a month given that thr are a lot of empty flats in Mumbai purchased by investors.

            4. Excellent transaction. No arguments.

            5. I fully agree that in your case, real estate came is very useful. however, I guess a term insurance would have achieved the same purpose. the sum assured could have been invested in a bank FD and used to pay living expenses. Of course, 27 years ago, financial literacy was low and products were costly. However, today is different, right?

            6. Tough call, but just a an alternative thought. If your brother in law had invested all his money that he had earlier used to buy a house in a mix of FDs, mutual funds etc, wouldn’t that too have been useful for medical expenses.

            1. Piyush

              THanks for giving your view points ..

      2. venkat says:

        Hi Manish..

        Very interesting and useful thread I found on Owing Home…
        a few words of mine..

        People are in crunch because they bought home for which they cant afford paying EMIs for long time. And failed in choosing right home at right price. If you consider that segment, rent home will appear as cheaper one.

        It’s always better to own a home…
        But, One must take care in buying at affordable as you said….
        They should also look at taking at lower interest rates preferably fixed one.

        For example..

        I cant afford an EMI above xK. So what I do is I will invest in land (at secured place only…means in village where you are comfortable) for yK as EMI for short term period, which is comfortable for me. I will choose it where there is appreciation( assumption like in MFs returns through SIP).

        Over the years(>10) once my salary is increased and the value is appreciated, then I will sell that land and buy my dream home at the same cost in the city where am living. At this point of time I can input 70-80% as down payment. I will go for short period loan. So, one can realize their dream without an hassle like this.

        There are always positive sides on owing home if you dont have it as liability. If MFs retruns expected are not at the level of your expecations , what any one will do? He can’t go back 15 yrs back, but to accept the the returns whatever lower rate they are. But in case of own house, the property value is never went down as far as I know.. if you have invested in true place for true value.

        I have seen 90% people appreciated their wealth 3-10 times even on investing property. MFs, PPFs, stocks may or maynot return the amount you expect.
        But, the property will give you decent return over the years, at least, not like a failed MF @2-3% . Worst cases I have seen as 10-11%.

        But over the years one should have own home, no point in living in a rented home if one have crore in bank balance but keeping the body outside of the apartment once dead.

        Like MFs and stocks, care must be taken when buying a property(again….@ affordable ). IT HELPS!

        1. venkat says:

          forgot to add…the line @for those who are interested in stocks/MFs
          MF investements are subject to market risks…
          But property doesnt have such situations..if you invest it properly like Maish Avasthi…(least return might be 10%)

        2. Yes Venkat .. agree with you

          Good to hear your views .


    3. amol says:


      I am disagree with few of the reasons you have put forward here
      1. The story you have told about your friends who had investment money into MF or equity(aggressively trade as you explained) and run into losses does not clearly fit into the scene in its comparison with real estate return. Their pattern of investment can not act as a generalize reason for favoring real estate. Getting good returns from MF or equity also needs disciplinary approach as well as some home work before putting the money in. I am sure someone who had invested consistently and in disciplinary way must have got good returns as compare to real estate.
      Again, its a separate topic of discussion. There are lot of points/guidelines one needs to consider while doing investment in MF/Equities.

      2. You will be shocked to know that, In case you had invested Rs. 10,000 in Wipro in the year 1980, today it would be worth Rs. 350 crores (assuming you consumed all the dividends). (Source : It’s much much higher than the figure who have quoted in real estate return(2.5 crore in 35 years).

      1. Amol

        Would be great if you can tell which Manish you are referring to 🙂 , Me or Manish Awasthi ?


        1. amol says:

          Hi Manish,

          I was referring to Manish Awasthi and not you :-). Sorry for the confusion.


    4. 20K to 2.5 crore in 35 years is 22.6 % CAGR. But one fourth of the price would go in long term capital gains tax. For the full extent of 35 years, there was a risk of illegal occupation of the property against which you would need to be cautious. Needless to mention, frauds in real estate is much more than in stock market (Harshad Mehta and Ketan Parekh notwithstanding).

      A mutual fund, Reliance Growth, has given 29.5% CAGR returns since its inception in 1995: with ZERO long term capital gains tax. Tell me a SEBI registered mutual fund which has run away with investors’ money.

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