Is investing in Home equivalent to buying an Asset or Liability?

Is investing in Home equivalent to buying an Asset or Liability?

Indian middle class is known for one good thing and that is its Savings habit.  However, significant difference got introduced between Generation ‘X’ and generation 'Y'.  For Generation X, Savings preceded Investments whereas for Gen 'Y', investment precedes Savings.  Few of the reasons for this are Peer pressure, Easy Credit availability, Attractive Advertisements, Govt's incorrect policies, Status Egos, Family Nuclearization etc.  

For Example, if you got a new employment, the first peer pressure you sense is, have you purchased a Flat? If not, you should purchase one.  You get lots of Tax benefit.  Which car are you planning to buy? You can get a Car loan too. Why don't you start investing in ELSS Mutual funds to save Tax etc? Imagine how depressed you feel when you are unable to boldly say “Yes” to all the expectations from your peer on above lines.  You feel you are the laggard.  

Also read: Fixed Vs Floating Home loans – Which is better?

Please remember the Golden Rule: – Every Loan is meant to make you poor day by day, month by month, year by year like a slow poison. The loans will have amazing names, branding, but you end up losing more than you benefit.  Honestly speaking, tax benefits from House Loans have too many riders and too less benefits.

Let us examine if buying a House is buying an Asset or a liability.

A recent study by the Ministry of Urban development and Poverty Alleviation revealed that around 42 % of the built up Dwelling Units (or flats) across the country are lying unoccupied by their owners or anyone else.  What does this indicate? 42 of 100 people have purchased their homes not for living but as an investment or deferred living. Remember, that buying a house for a middle class Gen 'Y' is not possible without a Housing Loan.  The housing Loan typically paid over 15-20 years increases the cost of the house somewhere between 170% to 180%.  And did you account for depreciation of house price on account of weathering.  You were busy looking at existing and prospective property rates? Your home price appears grow day by day, because you keep reading and hearing from realtors and brokers.  But these prices are artificial to great extent and can collapse if a holocaust of Recessions sweeps across the Globe.

So a depreciation of House price value over 15-20 years along with increase of Cost by 170% to 180%, leaves you with an asset bought dearer, but yielding lesser value on account of its ageing, weathering and depreciation.  

So think before you leap to buy a house 1) as investment 2) on loan and 3) for your living.

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This is a guest article from Sanjay Sharma who is from Information and Security domain working for a top Indian IT company.  He has passion towards analyzing stock market investments. 


  1. Hi Suresh,

    I agree to your post. Better to go with less loan amount. I am from Pune. I need one suggestion whether to go for buying a open plot or Flat. I  saw three options: 1) Open plot in costing 15 lac per 1000 sq.ft 2)new ready possesion flat(900 sq ft) 45 lac in the same area 3)15 years old flat(615+565 terrace) in 38 lac. but problem is we will not get loan on plot.

    I think buying plot is dead investment and we will get return after 5-6 year only but in flat we will get instant rent 12k per month. please suggest which is better for investment purpose. Thanks in advance.

    1. Rajesh, I agree to your point to some extent. Flat can give instant rent. But Plot can multiply your returns. This is one area which I have neglected and now I am realising. Some of my friends has brought 10-20 years time frame back and their money is now multiplied 5, 10, 15 times their investment. Real estate is always good, however it depends on selecting a good property. Now I am planning to go for such small investments which can create good returns in long run. I would vote for 1) Plot 2) New Flat 3) Old flat in the sequence.

  2. The writer says Loan is a Slow Poison, I am sure this he has said based on proper knowledge, understanding and correct information/feedback from the market. It is in fact the interest on loan which is poison. The present day economic system has been formulated by a group of business tycoons from USA backed by the Jews Lobby to make rich richer and poor poorer. The entire system is a corrupt system. Had RBI looked into some other better option available in the market would have been much better for indian economic system.

  3. Dear Suresh

    What would be better investment from your point of view in current market conditions and up to a period of 5 years. Recurring deposits or buying some flats, which one would yield better returns?



    1. Hiren, Investing in real estate is always good for long term. Little care on choosing the location is important. If you want for 5 years, look only for Bank FD/RD or debt mutual funds. 

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