Do you need to buy that house when rent is so cheap?

The Woodpecker Airlines flight landed at the Dambolin Airport in Goa.

It was pouring cats and dogs. We were soon out of the market and driving to Canacona, a quiet non-touristy corner of South Goa.

“So, S didn’t say anything?” I asked.

“I was told, it’s your life, and you live it the way you want to live it,” she replied. “And so, I am here, with you.”

“Interesting,” I said, not knowing what else to say.

“You know, I wanted to ask you something,” she said, getting to the point very quickly.

“Tell me.”

“I want to buy a house.”

“So, what is stopping you?”

“Actually, I am not sure. It’s just such a big financial commitment.”

“Yes, possibly the biggest one you will ever make.”

“True. And which is why I wanted to talk to you,”she replied.

“Shoot.”

“I have managed to find a two BHK, which suits my needs perfectly.”

“How much will it cost?”

“I have done the math, it will work out to a little over a crore.”

“You have that kind of money?” I asked, surprised, knowing fully well that she had been very lackadaisical about money over the years.

“Actually, no. I have savings of around Rs 35 lakh. And I was hoping to use a part of that to make the down payment.”

“And for the rest, you wanted to take on a home loan?”

“Yes. I have checked with the bank. They have said, they can give me a loan of up to Rs 75 lakh.”

“At an interest rate of 8.5% and a tenure of 20 years, the EMI will work out to around Rs 65,000. You think you can afford that?”

“Yes. I can manage.”

“For 20 years?”

“Yes,” she said. “Why are you questioning me like that.”

“Interesting. You know that with an EMI you cannot take a break from working, every few years, like you are currently used to.”

“Yes. I know that. I was hoping to instill some discipline into my life,” she replied very confidently.

All these statements told me that something was not right here. From whatever little I had known of her, this was not her talking, but someone else.

“Tell me something, what is the rent you currently pay,” I asked.

“Well. The rent works out to Rs 20,000 per month plus electricity. And by buying the house, I was hoping to save on the rent.”

“And this is the same house you want to buy?”

“Not the same one. But something similar in the same society.”

“At Rs 20,000 per month, you pay around Rs 2.4 lakh per year as rent.”

“Yes.”

“For a property which is worth Rs 1 crore, you pay a rent of Rs 2.4 lakh per year. This means that the rental yield is 2.4%. Now you want to spend Rs 65,000 per month to stay in a similar house. Doesn’t make any sense.”

“But that is what I can afford,” she said rather agitatedly.

“Yes. And that is what you are currently paying for as rent as well. Are you landlords troubling you?”

“No, they are sweetest couple in the world. They will let me stay as long as I want to stay, as long as I keep increasing the rent a little, every year.”

“Then? Do you have a kid?”

“Kid? Where did that come from?”

“I mean, when people have a kid they feel the pressure to buy a house to ensure that there is some stability in the child’s life.”

“Oh.”

“Then? Where did this house thing come from?”

“Parental pressure yaar,” she said. “What else. They said, you haven’t married. At least buy a house.”

Meanwhile, Goa was as beautiful as ever. The clouds continued to play hide and seek with the hills. And wherever one looked there were cashew trees.

(The example is hypothetical).
(Vivek Kaul is the author of the Easy Money trilogy).