Nikhil Kamath, the co-founder of Zerodha has finally changed his stance against owning a house. The young entrepreneur, who has long been preaching the benefits of renting over buying a house, in his podcast recently revealed the reason for changing his opinion.
In a recent episode of his podcast ‘WTF is with Nikhil Kamath’, Kamath explained that he bought a house, something that surprised many. He agreed with the fact that there are certain benefits associated with renting, however, there were numerous disadvantages as well. Specifically, he noted the uncertainty involved with rental agreements, “The thing with renting… is that you don’t have foresight as to when you can move out."
This realisation made him begin to view owning a home as a much better option.
“I had to move out of this house, whereas I might have liked to stay longer in this house," he added.
Some of the changes that Kamath spoke about during the podcast were progressive. He said that being able to avoid the “nuisance value" of constantly shifting made owning a home appealing.
Kamath may have bought a home but he continues to have concerns regarding the prospects of real estate as an investment option. He highlighted his worries regarding liquidity, saying that he wants to invest in assets that can be converted into cash without much loss in value, for instance, gold.
“I hate the illiquid nature of real estate… Places like this have fewer buyers… pricing is very arbitrary in nature," he said.
Besides, Kamath was also dissatisfied with numerous financial implications attached to real estate operations, including stamp duties that can go up to 5% to 6% of the property value. He compared this with share trading which has no such charges and funds are more easily convertible to cash.
Kamath also raised concerns about the viability of acquiring properties for purposes of rental income, as many such properties yield low returns as compared to the prevailing inflation and interest rate.
“I think nobody makes money from buying and renting a place… accounting for inflation and interest rates, the return on this investment is negligible," he said.
Other guests on the podcast included Irfan Razack, Chairman and MD of Prestige Group, and Nirupa Shankar, Executive Director at Brigade Group. They debated whether owning a house creates value for an investor’s portfolio or not.
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