There is a common belief in India that living on rent is a waste of money and owning a home is a real investment. This belief has been taught to the middle class for generations. But now some experts, like CA Nitin Kaushik, are calling this belief a financial trap, in which people get trapped without thinking.

Suppose you buy a flat worth Rs 1 crore, and for this you take a home loan of Rs 80 lakh from the bank. On this, you will have to pay an EMI of about Rs 72,000 every month as per the interest rate of 9% and a period of 20 years. That means in 20 years you will pay a total of about Rs 1.73 crore. Whereas the price of the house was only Rs 1 crore. Out of this, about 93 lakh goes only as interest. That means, for the amount you spend to buy that house, you could have lived in the same house on rent for many years. Still, why do people consider it a waste?

Buying a house: Emotion or wisdom?

Buying a house often becomes an emotional decision. People take a loan in a hurry because of what people will say and how long they will stay on rent. But this decision is not driven by mathematics but by emotions, and this mistake proves costly.

People invest their entire savings in a down payment. After this, more than half of their salary is spent on paying EMIs for years. The result? There is no emergency fund left, and no flexibility in life. If you get a job in another city, then the transfer is difficult, the cost of repairing the house is separate, and you have to pay property tax yourself.

Living on rent is not a disadvantage but an option.

CA Nitin Kaushik says that in Indian cities, the rent return is only 3.5% to 5%. That means the rent of a house worth Rs 1 crore is usually not more than Rs 25-30 thousand per month. If you invest the same amount in different investments, like mutual funds or the stock market, then the same money can give you many times the return in 20 years. On the other hand, the return in real estate is only 6-7%, and that too only when the market is doing well. On top of that, the burden of the loan remains every month.

Do not decide in haste.

Buying a house is not wrong. But it is important to think when, how, and why to buy. CA Kaushik advises that first create a strong emergency fund, plan in such a way that the EMI does not exceed 25-30% of your salary and some savings remain even after the down payment. Buy a property only if you plan to live in it for 7-10 years.

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