‘Ek Ghar Ho Apna…’ Most people first decide to buy a house as soon as they get a job. In India, the decision to buy a house is also linked to emotion. In today’s era, buying a house-flat is a bit easier. Because a major part of the total cost of the house is found in the loan from the bank. People juggle the down payment here and there. But is it the right decision to buy a house by taking a loan?
Today we will try to explain to you that how buying a house-flat by taking a loan is not a profitable deal, and it would be better to stay on rent than buying a house by taking a loan. Financially, you can assess yourself what is going to be beneficial for you. Generally, when people buy a house by taking a loan, they remain tied to the EMI. But buying a home is a big decision, and there is emotion attached to it. Let us understand with an example whether buying a house would be a better deal or living on rent.
Don’t take decision emotionally
Actually, most of the people in our country buy 2BHK flats, especially in metro cities, this is the trend. Let us assume the cost of a 2BHK flat to be around Rs 40 lakh. In which often buyers make up to 15% down payment, that is, 5 to 6 lakh rupees are given as down payment. After this Stamp Duty, Registration Charges and Brokerage are charged separately.
Not only this, on buying a new house, they often buy new furniture and decoration items as well, on which according to an estimate they spend up to Rs 4 lakh. If you add the down payment and this expenditure, then people spend up to Rs 10 lakh separately before house-warming.
Let’s understand with an example… To buy a flat worth about Rs 40 lakh, someone makes a down payment of Rs 5 lakh and takes a loan of Rs 35 lakh from the bank. At present, home loan is available at 9 percent interest rate if the credit score is good. At 9% interest, an EMI of Rs 31,490 is made on a home loan of Rs 35 lakh for 20 years. Apart from this, you will have to spend around Rs 10 lakh on down payment and other things.
If you live on rent, you will be able to invest this much
Now let’s look at the second situation. If you take the same flat on rent (Flat On Rent), then you will easily get Rs 15,000 per month. If seen in this way, every month you will have more than 16 thousand rupees saved for savings. Now if this money is invested by making a good strategy, then a fund worth crores can be prepared. In today’s time anyway many great instruments are available for better returns.
Excellent returns from SIP
SIP is considered a good instrument in terms of giving more returns with less effort. 10 to 12 per cent returns are common for SIPs. If you invest Rs 16,000 every month for 20 years in a SIP with 12% return, you will get around Rs 1.60 crore after 20 years. While you will invest around Rs 38 lakh in 20 years. In case of SIP, 15% return is not a big deal. If you invest money in such a SIP, then after 20 years a fund of about Rs 2.42 crore will be ready with you.
Apart from this, apart from the EMI of every month, you also have a lump sum amount of Rs 10 lakh to invest, which you were going to spend from pocket on down payment and paperwork. If you invest this 10 lakh rupees lump sum somewhere, then after 20 years it will also become a huge amount. This investment in 20 years at 12 percent per annum will be about Rs 97 lakh and at 15 percent it will be Rs 1.64 crore.
On the other hand, if you buy a house, it will take you 20 years to become debt free. The rate of real estate in India is increasing at the rate of 6-8 percent annually. On this basis, the house which you are getting for Rs 40 lakh now, you will get it for Rs 1.20 crore after 20 years. That is, the flat which will be bought today for Rs 40 lakh by taking a home loan, its cost after 20 years will be Rs 1.20 crore according to an estimate. But at the same time the value of the old house always decreases.
Funds up to 4 crores can be deposited
While living on rent, you can become a millionaire by investing EMI money. Because in the previous situation i.e. by staying on rent, you can deposit a fund of about Rs 4 crore in 20 years. This is according to 15 percent return. Even if you get 12% return, after 20 years you will have a corpus of more than Rs 2.5 crore. Thus, investing smartly while living in a rented house can be many times more beneficial than buying a new house. And after 20 years with the amount of investment you can buy 2 to 3 houses at the current price.
If you stay on rent and invest for 20 years, then apart from buying a house, you will have a huge amount saved. According to an estimate, a fund of about Rs 2 crore will be in your account.
Experts say that according to investment, real estate can never be a wise decision. Buying your home can be an emotional decision, not an economic one. Apart from this, after buying a house, people remain tied to a city, think about the house before taking a decision in their career. Along with this, a major part of the earning goes to pay the EMI, due to which they are not able to consider other options including investment, because they remain in tension for 20 years regarding the loan. Along with this, even in the event of a job crisis, people get financially worried. That’s why one should not insist on getting a house at the same time as starting a job.