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Stuck In Your Job Because Of Your EMI?Money

Stuck In Your Job Because Of Your EMI?

Over the years, the average age of the first-time home buyer in India has been declining. For the most part, this has been seen as a positive sign, cheered by analysts, builders, real estate professionals and politicians alike.

The consequence, however, of bearing such a large financial responsibility early on, is that we get addicted to a lifestyle that can become a heavy cross to bear. For Indians, owning a home - specifically, the one in which you live - has always been the holy grail of financial security, a necessary pursuit to counter the lack of a social safety net. The sooner one achieves this milestone, the faster one can claim bragging rights and move on to meeting other financial goals.

Consider Praveen, 35, a salaried executive and father of two. He has wanted to start his own business for some time now, but knows that in the absence of a steady salary, he'll find himself underwater on his payments. To free himself from paying rent in the future (not the end of the world, by any means), he's signed himself up for a long-term financial commitment that will dictate the terms of his life for years to come.

Praveen's financial scenario:



As long as Praveen saves rent money for six to 12 months, his family should be able to manage their expenses if he chooses to quit his job and pursue his own venture.

In fact, he could sell the current house, invest 25 lakh either in a small property outside Delhi NCR or in any high interest yielding security, and then rent the same house he's currently living in for Rs 20,000 per month (rental yields are now down to 3% per annum of the value of the apartment). What's wrong with renting a house to live in while owning a smaller, more affordable property as an investment? The 25 lakh that he invests would appreciate and he'd still save Rs 30,000 per month from his current expenses of Rs 1 lakh. He would lose the home loan interest benefit though, but it would be less than Rs 8,000 per month.

So ingrained is the notion of home ownership that renting when you can afford to buy evokes a barrage of questions and speculation on your financial security. Nevermind the returns on real estate in a city like Mumbai, or the fact that middle-income Indians have been completely priced out of such a market. The pressure to buy a home as soon as possible means Indians are forgoing other options to build wealth in the long term, simply because renting has become socially unacceptable.

And yet, Praveen and his family are so attached to the idea of owning their dream home, they don't see it quite the same way. So he toils away in a dead-end job because that way, at least he gets to own his house - even if it means doing so over many years.

(Main Image: Thinkstock)

( About the author: This article has been contributed by Manish Shah of Big Decisions )

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