घर खरीदना निवेश या सिरदर्द, कहीं आप तो नहीं कर रहे ये बड़ी गलती! – buying a home financial mistake india ntcpsc
Having your own home in India has been considered the biggest symbol of success and security. However, recently a social media thread by chartered accountant Nitin Kaushik has started a new debate challenging this notion. He has tried to explain with data whether buying a residential property in India is actually a wealth-creating investment or just an emotional decision, which we unknowingly mistake for investment.
Nitin Kaushik shared a detailed post on He said that people often look at the increased property prices, but forget about the hidden expenses which hollow out the profits.
Kaushik wrote in clear words, “Your house is a ‘liquidity trap’ disguised as property.” He further said that many people mistake nominal price increases for real wealth creation. According to him, there is a huge difference between the increased price on paper and the actual profits in hand.
To explain the calculation of returns, Kaushik shared a hypothetical example. Suppose, in the year 2015, a flat was purchased for Rs 80 lakh, whose current price is now around Rs 1.2 crore. At first glance it appears to be a profit of Rs 40 lakh, but Kaushik has revealed its deeper layers.
Also read: Fast pace of real estate, more than 70 thousand houses sold in the first quarter
According to him, if you add additional expenses like 6% stamp duty, monthly society maintenance and annual property tax, the effective purchase and maintenance cost of that house increases to around Rs 95 lakh.
Reality of Annual Returns: He argued that the increase in investment from Rs 95 lakh to Rs 1.2 crore in a decade represents only 2.3% annual return (CAGR).
Inflation hit and purchasing power
Kaushik pointed out that this is a return of 2.3%. India Much lower than the long term inflation rate. He commented, “In real terms, your purchasing power has actually decreased.” He says that homeowners may feel rich on paper, but they fail to generate returns that can beat inflation and actually increase their wealth.
This thread also compares residential property returns with the performance of the equity market during the same period. Kaushik claims that if the same Rs 80 lakh had been invested in Nifty 50 index fund in the year 2015, then by 2026 that investment would have increased to more than Rs 2.2 crore. This is much higher than the returns from apartments.
He calls this difference ‘opportunity cost’, the price you pay for locking up your capital in real estate assets with low liquidity and recurring expenses. His statement has created a lot of buzz in the online world, especially among young investors, who are now preferring financial assets like mutual funds and index investments instead of traditional property.
What is better apartment vs land?
Kaushik further argued that apartments behave like a depreciating asset as the building ages with time and requires constant expenditure on repairs, maintenance and upgrades. He sarcastically wrote, “The day you move into a house, the building begins to decay.” He claims that investors are actually paying for “dead square footage”, the value of which gradually diminishes.
Instead, he advocated purchasing land in emerging development areas, citing the advantages of land as the maintenance cost of land is much lower than that of an apartment. He gave the example that if a plot of Rs 80 lakh grows to be worth Rs 3.5 crore, it gives a compound annual return of about 15.8%.
Also read: Is real estate a means of siphoning off black money? Why do people not trust RERA?
—- End —-
