Let's say you buy a house worth Rs 1.1 crore (Don't freak out. This is how much a one-bedroom or a two-bedroom apartment -- depending on which part of the city the house is in -- costs in Mumbai today). Actually you have invested say Rs 10 lakh and borrowed Rs 1 crore as home loan. You do not include the brokerage, registration costs, furnishing, annual maintenance, etc. When you do your return calculations, include all this. If you have borrowed money you pay interest -- have you included that?

If not, read this. On a Rs 1 crore loan at 9.5 per cent per annum, for 20 years, you pay Rs 1.23 crore interest over and above the Rs 1 crore you borrowed as home loan. Which means over these 20 years you have paid your bank approximately Rs 2.23 crore (interest plus principal)! Now, to make some profit you will need a buyer who will buy the same property for more than Rs 2.33 crore (Don't forget your own contribution of Rs 10 lakh) after 20 years. And yes, your monthly EMI for a loan of Rs 1 crore for 20 years comes out to a neat Rs 93,213!

Well, you may not actually be wanting to sell it after 20 years, or may not even buy a home worth Rs 1.1 crore today, or may buy a home that costs you anywhere between Rs 50 lakh to Rs 1 crore, but these calculations (the interest you pay on a 20 year loan is almost equal to the loan amount) here are to give you a clear idea about the obscene amounts involved in the whole deal and ponder if buying a home on loan is worth your time and money.

Historically, over long periods of time this 'profit' is a single digit number. Always, in any part of the world -- US or India!

A home as a good investment? Go figure.

A cousin's family has been struggling with a house in Bangalore. They are unable to sell it, and unable to rent it. The whole process of finding a buyer or a tenant is not as simple as the builders/brokers make it out to be.

Even if you do get a good tenant -- how long will the tenant stay, will s/he pay the rent on time, will s/he keep the house in good shape -- are questions that you will not be able to answer very easily.

In Indian conditions, the rent is far, far lesser than the EMI that you pay (Rs 93,213 for a Rs 1 crore loan), so there could be a cash flow issue also.

Do not throw money at the landlord; it is waste of money. You might as well buy the house. Oh, really? You are joking, right?

In Mumbai a house costing Rs 2.25 crore will cost you about Rs 225,000 per month as EMI whereas the same house is available at a rent of about Rs 30,000 per month.

What are we talking about? Rental yields (rate of return) are about 2 per cent per annum and interest costs are between 9 to 10 per cent per annum. It will be sheer innumeracy to assume that the differential will catch up over a 5-year or a 7-year period. It will not. Period!

This is clearly a movie impact. Old movies -- any number of Indian movies were made with the theme of a cruel landlord. Well, if your landlord throws you out, find a new landlord. By the way the landlord is far more scared that the TENANT will leave!!

So why do the people want you to buy a house? There is a vested interest in that: how will the steel manufacturers, cement manufacturers, builders, brokers, state governments (stamp duty, registration, etc.) -- make money? So it is a 'social' requirement to buy a house. Do not fall for it. You do not need it.

So when you are under social, peer, parental, sibling, marital pressure to buy a house direct them to this article here ;-)