Did You Know?
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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