The Rs 1 crore question: Should you invest in stocks or buy a home?
Published by India Today
Abhishek Kumar's role: Quoted
Abhishek Kumar said the choice should start with opportunity cost and the reason for buying, with self-use often favouring a home. He cautioned about debt levels, emergency funds and low rental yields, and suggested building an equity corpus first.
What Abhishek Kumar said
How should I begin deciding between buying a ₹1 crore home and investing in equities?
I suggest starting with the opportunity cost: weigh what equities might earn against the rent you would save plus any rise in the property's value. Since neither return can be known in advance, also be clear about why you want the house. If it is for your own use and a stable home for your family over the long run, buying is the natural choice even if equity could do better.
What should I check before committing to a home loan?
Look at your current debt-to-income ratio and your other important goals so that you do not overspend on the house. I would commit to a purchase only if your income looks stable for the long term, or if you plan to keep the property even after a relocation. Keep an emergency fund covering at least six to twelve months of expenses, so a job loss does not force you to sell to pay the EMI.
Does buying property make sense purely as an investment?
From a pure investment angle, I rarely find it works when rental yields are well below home loan interest rates. That negative carry means the property needs exceptional price growth to beat a diversified equity index. Real estate is also illiquid, can take months to sell and carries high transaction costs, which hurts during a job loss or a move. It is a micro market too, so what works in one locality may not work in another.
Should a young earner buy a home early or build an equity corpus first?
I understand the social pressure, as the families of prospective brides often expect the groom to own a home, and that pushes many young people into loans early. Still, our suggestion is to grow an equity corpus before buying, so your capital can compound during your peak earning years. That gives you room to make a bigger down payment later, take on less debt and avoid becoming house poor once family responsibilities grow.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on mutual funds
The article weighs a common middle-class choice: buying a ₹1 crore home or investing the money in equities. It compares the total cost of a home loan with investing the EMI amount, looks at rental yields, liquidity and risk, and discusses how much of net worth to hold in real estate.
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The Rs 1 crore question: Should you invest in stocks or buy a home?