Why Some Rich Indians Select Renting Over Shopping for a Residence — Our Wealth Insights

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Introduction

Like me, you too have in all probability grown up listening to that proudly owning a house is the last word signal of success & safety. In India, shopping for a home is nearly like a ritual. It’s what our dad and mom dreamed of, and it’s what many people purpose for.

However not too long ago, I got here throughout a narrative that made me rethink this concept (test this video).

A person with a web price of over Rs. 50 crore chooses to lease an expensive house in Mumbai’s Churchgate as a substitute of shopping for one. Sure, you learn that proper, Rs. 50 crore, and he’s nonetheless a tenant.

This obtained me pondering and really curious.

Why would somebody with a lot wealth lease as a substitute of purchase? And is that this a one-off case, or are extra Indians pondering this manner?

By the best way, I’m personally from that group who would moderately purchase a house in 20s than dwell on lease. Previous Faculty.

Let’s dive into this matter of even excessive web price folks selecting to dwell on lease.

The Conventional Indian Dream of Proudly owning a Residence

In India, proudly owning a house is greater than only a monetary choice. It’s emotional. It’s cultural.

Rising up, I keep in mind my neighbour uncle saving each penny to purchase a small flat in Delhi.

He used to say, “A home is your safety. Renting is like throwing cash away.”

Most Indians share this view. A survey discovered that 88% of city Indians aspire to personal a house. For a lot of, it’s about stability, standing, and leaving one thing for the following technology.

However proudly owning a house isn’t low cost, particularly in cities like Mumbai, Delhi, Bangalore, and even Pune. A good 2BHK in a superb Mumbai locality can simply price Rs. 2-5 crore.

For the common salaried individual, this implies years of saving or a hefty dwelling mortgage. Even then, EMIs can eat up half your revenue.

So, naturally, we assume individuals who lease are those that can’t afford to purchase. They’re both younger professionals, or perhaps they’re in jobs that require frequent strikes.

However what about somebody who can afford to purchase, somebody with crores within the financial institution, and nonetheless chooses to lease?

That’s the place issues get fascinating.

A New Type of Renter – The Rich Tenant

Let’s return to our man within the video.

His identify is Gajendra, a wealth supervisor dwelling in a spacious 3BHK in Churchgate, considered one of Mumbai’s poshest areas. His house is 1,800 sq. toes, with a shocking balcony and pure gentle flooding each room.

The lease? What a majority of us can’t think about to pay, Rs. 3 lakh per 30 days.

For a lot of in India, that’s greater than a yr’s wage.

But, Gajendra isn’t struggling to pay it. With a web price of over Rs. 50 crore, he might purchase a home, or a number of. So why lease?

What’s Gajendra Rational

Gajendra’s reasoning is easy however highly effective.

He desires to dwell in a major location now. Churchgate is near his workplace, his children’ faculty, and the railway station. He walks to work in eight minutes. He eats home-cooked meals together with his household day by day.

For him, that is true luxurious, not proudly owning a home, however dwelling a life that saves time and maximizes consolation.

Alternatively, shopping for a house in Churchgate would price Rs. 10-12 crore. That’s some huge cash however he can afford it contemplating his web price of Rs.50 crore.

However he has one more reason for not shopping for the home now.

He’d want three flats (one for himself and two for his brothers). That’s practically his complete web price gone in a single go. As an alternative, he invests his cash in monetary belongings, anticipating them to double in 5-6 years at 12-15% returns.

Renting lets him preserve his wealth rising whereas having fun with a dream way of life.

Why Renting Makes Sense for the Rich

Gajendra’s story isn’t distinctive.

Extra high-net-worth people (HNIs) in India are selecting to lease, particularly in metro cities.

A 2024 report by Knight Frank India famous that luxurious rental demand in Mumbai and Delhi grew by 15% prior to now two years.

These aren’t individuals who can’t afford to purchase. They’re entrepreneurs, professionals, and buyers with crores in belongings. So what’s driving this development?

• For one, actual property in prime areas is insanely costly. A sea-facing flat in Mumbai’s Nariman Level or Delhi’s Lutyens’ Zone can price Rs. 20-50 crore. Even for somebody with Rs. 10 crore in financial savings, shopping for such a property means liquidating most of their portfolio. That’s an enormous danger. What if the inventory market or mutual funds might give them 12% returns yearly? That’s Rs. 1.2 crore a yr with out touching the principal. Renting lets them preserve their cash working whereas dwelling in a house that matches their standing.
• Then there’s flexibility. Cities like Mumbai are dynamic. Enterprise hubs shift. Within the final decade, we’ve seen Decrease Parel or BKC changing South Mumbai for a lot of firms. Renting permits rich people to maneuver nearer to new alternatives with out being tied to a property.

Gajendra himself desires of upgrading to an NCPA house with a sea view. Renting makes that doable with out the trouble of promoting a home.

The Energy of Compounding Wealth

Let’s focus on the numbers as a result of that’s what retains most HNIs glued to their funding portfolios (delayinng the home buy).

Think about you’ve gotten Rs. 5 crore in investments. When you purchase a home in a major space in Bangalore, you might need to spend all of it. Your wealth is now tied to that property. Certain, the true property can even recognize in worth, say, at about 7% per yr in, based on a 2022 Colliers India report.

However what when you rented as a substitute and invested that Rs. 5 crore in a diversified portfolio?

At 12% annual returns, achievable by means of fairness mutual funds or shares, your cash might develop from Rs.5 Crore to Rs.10 crore in six years. In the meantime, you’re paying about Rs.50,000 a month in lease, which is a small fraction of your revenue when you’re rich.

That is precisely what Gajendra is doing.

His Rs. 50 crore is invested, not locked in actual property. He expects it to double to Rs. 100 crore in just a few years. If he buys three flats now, he’s again to zero. He’ll have to begin his wealth-building journey from scratch.

Ask any investor, and none of them want to begin their wealth-building journey once more. Not that it’s too powerful, however the daily-lure of watching the portfolio turning into greater on a regular basis is simply too tempting.

Such folks have a really sturdy feeling that by renting, he’s betting on future monetary freedom. It’s a calculated transfer, not a compromise.

Is Renting Actually “Throwing Cash Away”?

Now, I do know what you’re pondering.

Renting looks like paying another person’s mortgage. Each month, Rs. 3 lakh leaves Gajendra’s checking account, and he has no asset to indicate for it.

My mother would in all probability say, “Why waste cash when you may personal?”

This can be a legitimate concern. In India, homeownership is tied to safety. A home is one thing you may move on to your children. It’s a security web if issues go mistaken. However Gajendra sees it in a different way.

First, for folks like Gajendra, they’ve a security web of Rs.50 crore funding corpus. Even when “one thing goes mistaken“, say a job loss, they’ve an enormous security web. They don’t seem to be like different widespread people who find themselves in determined want of an emergency back-up like a house .

Furthermore, for Gajendra, the actual waste is lacking out on life in the present day. He talks about his daughter, who loves her colourful bed room and paints whereas listening to birds from the balcony. His son enjoys a easy room together with his Mac and chessboard. Gajendra himself walks to work, avoids Mumbai’s brutal site visitors, and spends high quality time together with his household. This way of life is his precedence, not proudly owning a home.

He even says Mumbai’s tradition doesn’t choose renters. His neighbors don’t care if he owns or rents, they’re too busy dwelling their very own lives.

Nonetheless, I ponder, does this mindset work for everybody? What occurs once you’re older, and the concept of paying lease feels much less interesting?

Let’s discover that subsequent as effectively.

The Retirement Query – Will Renters Ultimately Purchase?

Most Indians, even rich ones, wish to personal a house earlier than retirement.

A survey discovered that 65% of city Indians see homeownership as a key retirement objective. Why? Renting in previous age might be tough. Rents rise with inflation, typically 5-10% yearly in cities like Mumbai. A Rs. 3 lakh month-to-month lease in the present day could possibly be Rs. 5 lakh in 10 years. Plus, landlords might be unpredictable. What in the event that they ask you to vacate? For retirees on a hard and fast revenue, these dangers really feel daunting.

Gajendra doesn’t discuss a lot about retirement, however he hints at flexibility. He says he’s not eager on shopping for in Mumbai, the place costs are sky-high. As an alternative, he’s targeted on rising his wealth.

I’m assuming that, by the point he’s 60, his Rs. 50 crore could possibly be not less than Rs. 200-300 crore. At that time, he might purchase an expensive dwelling with out blinking. However what if his dream dwelling, an NCPA flat, say prices Rs.100 crore by then?

Will he nonetheless delay shopping for, chasing a good greater portfolio? It’s a big gamble.

I believe most renters, even rich ones, will purchase ultimately. Proudly owning a house brings peace of thoughts, particularly once you’re older. However for somebody like Gajendra, with crores within the financial institution, renting would possibly work indefinitely.

His wealth offers him that possibility. He might lease ceaselessly, purchase later, and even transfer to a less expensive metropolis.

The query is, what number of Indians have that sort of monetary cushion?

The Mumbai Issue

Mumbai performs an enormous position on this story.

It’s not simply any metropolis, it’s India’s monetary capital, the place actual property is a unique beast.

A 2023 Anarock report says Mumbai’s common property value is Rs. 15,000-20,000 per sq. foot in prime areas. A 1,000-square-foot flat prices about Rs.2 crore, and that’s not even in Churchgate or Nariman Level. For ultra-luxury properties, costs hit Rs.50,000 per sq. foot.

No surprise even millionaires assume twice earlier than shopping for.

Mumbai’s tradition additionally helps renting. Not like smaller cities, the place proudly owning a home is a standing image, Mumbai is extra sensible. Like Gajendra says, his neighbors don’t care if he rents.

The town’s fast-paced life means folks worth comfort over judgment. Plus, Mumbai’s connectivity, trains, coastal roads, upcoming metro traces, makes prime areas like Churchgate extremely interesting for renters.

You may stroll to work, keep away from site visitors, and dwell close to high faculties and golf equipment.

In different cities, this stage of comfort is more durable to seek out.

Is Renting the Future for Rich Indians?

So, what’s the large lesson right here?

For me, Gajendra’s story reveals that wealth isn’t nearly proudly owning issues, it’s about decisions. Renting lets him dwell in a dream dwelling, save time, and develop his wealth. It’s a technique that works as a result of he’s disciplined, financially savvy, and in a metropolis that helps his way of life.

However I can’t assist questioning, is that this sustainable for everybody? What occurs when life slows down, and the concept of a “ceaselessly dwelling” feels extra vital? Therefore, I consider that renting is sensible solely for a small however rising group of rich Indians.

When you have a stable funding portfolio and dwell in a metropolis like Mumbai, renting is usually a sensible transfer. It frees up your cash to develop, offers you flexibility, and allows you to get pleasure from a premium way of life.

However for many of us, the emotional pull of proudly owning a house is robust. I’d guess that even Gajendra would possibly purchase someday, perhaps not in Mumbai, however someplace that looks like dwelling.

What do you assume, Would you lease an expensive flat to maintain your wealth rising? Little doubt, it’s an fascinating thought. However this concept can be dangerous if regular Indian’s start to observe the concepts of Gajenndra.

If you wish to assume and act like gajendra, you will need to have a portfolio as massive as him first.

Please share with me your ideas of this new tradition of wealthy Indian’s staying on lease for the sake of protecting their massive funding portfolio intact.

[Note: You can use the above home affordability calculator to check if you can afford to buy your dream house]

Have a contented investing.