Is buying a house the better option or renting an apartment? There have been convincing arguments in the favour of both the options, yet there has never quite been the final say on it.
In the latest episode of Nikhil Kamath’s ‘WTF is with Nikhil Kamath’ podcast, titled ‘WTF are Indian Real Estate Giants Up To?’, the billionaire co-founder of Zerodha discussed the largest asset class in the world with Irfan Razack, Chairman & MD of Prestige Group, Nirupa Shankar, Executive Director at Brigade Group, and Karan Virwani, CEO of WeWork India.
Kamath said that for all the advantages of renting there’s one major disadvantage that likely pushes people to buy a house. “The thing with renting, of all the advantages of renting there is one disadvantage is that you don’t have foresight as to when you can move out of the house. I had to move out of this house whereas I might have liked to stay longer in this house – not having the nuisance value of having to move felt like it made sense to buy a house,” he said.
Shankar asked the group whether buying a home does not add to the financial strengths and security of an individual, and hence isn’t it a better option.
“I feel like something like gold can give that to me. I hate the illiquid nature of real estate,” said Nikhil Kamath.
Razack said that while real estate is illiquid at times, it can also disappear immediately sometimes. “But it is an illiquid asset. You must get the right buyer, right price and there is a time period, it doesn’t happen overnight. If I have X amount of stocks, I want the money tomorrow, I can just dial up my stock broker and he will sell it and give me the money in three days’ time. That can’t happen in real estate,” he reasoned.
Nikhil Kamath added that in the stock market, one can also buy and sell without paying a stamp duty of 5-6 per cent. “It is very inefficient in real estate,” he said.
Shankar said that while the illiquid nature of the transactions, the long term capital gains that put a dent on selling a house, it is not often that one flips a house either.
Kamath said that for most people buying or selling boils down to a binary decision. “If I buy an apartment, I am stuck,” he said, adding that most people are not privileged like him to buy more than one house in multiple cities, and just let it be.