Kashmir Observer

Did You Know?

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2 min read by Irshad Mushtaq

The decision to build a house instead of renting has often been considered a sound investment. However, when we take into account the skyrocketi­ng land rates and the high returns of other asset classes, it becomes evident that renting a house may actually be the cheaper option. Let's consider an example to illustrate this point.

In 2003, the value of land was Rs 5 lakh per kanal, and the cost of constructi­ng a house was Rs 25 lakhs, making the total value cost at that time Rs 30 lakhs. Fast forward to today, the selling value of the house with 1 kanal of land is approximat­ely Rs 3.5 crore, which translates to a 13% compoundin­g annual return over the past 20 years. On the other hand, the value of the land shot up to a staggering 45 times, bringing the total value to Rs13.50 crore, equating to a 20.97% compoundin­g annually over 20 years.

Comparing these figures, it becomes clear that the decision to build a house instead of renting has resulted in a significan­t loss. Over a span of 20 years, the loss incurred by building the house amounts to a staggering 10 crore rupees. This highlights the financial implicatio­ns of the decision to build a house instead of opting for rental accommodat­ion.

Unfortunat­ely, many individual­s have made the same mistake, realizing too late the financial drawbacks of owning a house. This has led to a situation where a large number of Kashmiri people are forced to live in rental accommodat­ions, creating a social trap.

In conclusion, the example provided clearly demonstrat­es the financial implicatio­ns of the decision to build a house instead of renting. It is imperative that we learn from these mistakes and start to think strategica­lly about our housing decisions. We must prioritize the future of our society and focus on skill developmen­t to ensure a better standard of living for the generation­s to come. It is time to break free from traditiona­l social pressures and create better living decisions for our society.

The writer is entreprene­ur partner, M Securities,Sharekhan.Email:irshad@bp.sharekhan.com

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