For Indians, owning a property is not just about investment but it is stereotyped as an achievement that is associated with their growth, self-pride and respect. This emotional attachment to house buying may overpower the real financial calculations and may put the buyer in financial risk.
Explaining this scenario, ArthaYantra CEO Nitin Vyakaranam says, “In general, it is assumed, renting a home is always considered an expense in our households. While, buying a home is considered to be an investment that could provide significant returns, perhaps at levels greater than any other assets such as equity or fixed income. Additionally, there has always been the social pressure on the middle class to be an owner rather than a renter. Buying a home is considered, a ticket to a superior standing in the social circles. Owning a house is also considered as security. On the other and, renting home is still considered an option for the segment of people who have not made it yet.”
Many buyers take wrong decisions by assuming above factors in decision making. It is equally important to evaluate the financial strength of an individual before buying one. Vyakaranam says, “The decisions made on the basis of the earlier mentioned factors can often lead a family into a path of financial misery. The common problems that we come across today include, buying a home that was out of reach, stretching finances to meet down payments, losing money in buying home too early without significant corpus, not preparing personal finances for the new outflows, not preparing for emergencies are few of the reasons that create problems while buying a house.”
He adds, “These mistakes could have a lasting impact on the economic future of the family and hit specific and important goals such as child’s education, retirement planning, marriage of child, living a stable lifestyle. This problem is exasperated in the section of the population which constitute the ‘first time home buyers’, who probably aspire to move from a rented home to an own home.”“Buying a home is perhaps the biggest life and personal finance decision to be made by a family, yet people often take that decision based on emotions, past performance metrics that are thrown by some zealous real estate developers who claim to increase the price every other day, creating a false sense of urgency and artificial demand,” he opines.
“It is essential that buying a home versus renting a home decision be taken objectively based on the personal finances of the individual or the family, cost of buying, cost of renting, city of stay, duration of stay and willingness to move to another city. While, emotional satisfaction is important, it cannot be allowed to cloud better judgment.”
Written By Arthayantra