Bengaluru Man Adds A Twist In The Real Estate Vs Mutual Funds Debate With One Sale

A man from Bengaluru bought a flat in 2011 that people said was too costly. Ten years later, selling that home funded a lavish apartment in Pune. He did this without taking a loan. And he still had money left over to invest. The story brings back the classic Indian question – which is better, a home or mutual funds?

A chartered accountant, Akhil Agarwal, shared his neighbour’s story on LinkedIn recently. In 2011, at what looked like the peak of the Bengaluru market, he bought a flat. Many people doubted his decision, but years later, the value of the flat grew exponentially. It gave his family a stable home and helped them afford a better life in another city.

The proceeds from selling his flat helped him with his move to Pune. He was able to get a lavish new apartment there. There was money left over after he bought the flat outright. Akhil Agarwal challenges the either-or debate between mutual funds (MFs) and owning a home. He says the real math is in the rent that is saved.

The EMI for a Rs. 1 crore flat might be Rs. 60,000-70,000 each month. Rent for the same home might be only Rs. 20,000-25,000. It would mean savings of more than Rs. 90 lakhs over 20-30 years. Also worth considering is that property price appreciates by 3-4 times in metros. These numbers show home ownership is a smart choice.

Agarwal stresses that comparisons between house ownership and mutual funds are too limited. These do not factor in the fact that rents are always rising. They do not take into account the feeling of stability that comes with owning a home. Also, they do not consider how much mutual fund returns can change based on the market selection and timing.

The scenario is not always so clear. It may be cheaper to rent where the rental yield is lower. This is true where the ratio of price to rent is more than 20 times. Investing money saved on rent into a 12% CAGR, MFs give good returns. In Tier-2 and Tier-3 markets, it can beat modest gains from property growth.

Owning a home is more than just financial benefits and numbers. Once a home is fully paid for, owners do not have to worry about rent and EMIs. They own a real and tangible property. Having a home means having peace of mind, knowing you have a permanent home. It gives a reassurance that renting or investing does not offer.

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