Buying a house has always been considered a big financial goal in India. But now a new trend is increasingly being discussed that is it a wiser decision to invest money by renting instead of buying a house? At the heart of this debate is the question whether it is better to buy a house worth ₹1 crore or invest the same money to create a net worth of ₹5 crore?
New mathematics of rent vs buy
Financial experts believe that by buying a house, a huge amount of money gets stuck in a single asset, whereas by living on rent, the same money can be invested in mutual funds, stocks or other investment instruments. In the long run, this strategy can create a bigger fund through compounding. For example, if instead of buying a house worth ₹1 crore, a person invests that amount at an average annual return of 12-13%, the amount can grow manifold in 20-25 years. This is why some people are considering it as a wealth building strategy.
Advantages and challenges of living in a rented house
The biggest advantage of living on a rental home is flexibility. It is easy to change job or city and there is no burden of heavy EMI in the initial years. Also, more liquid cash is available for investment. But there is also a challenge with this that the rent keeps increasing in the long run and the emotional aspect of not owning a home also affects people.
Is this strategy right for everyone?
Financial experts believe that this model is not right for everyone. Rent + investment can be a better strategy for those who have a stable income and good investment understanding. For those who give priority to security and stability, buying a house is still a better option.
