Sip vs home loan: Is it right to buy a house, or SIP? In the midst of rising inflation, changing rates of real estate and increasing investment options, this question definitely comes in everyone’s mind. There has been a debate on social media about this. Many people believe that it is more correct to buy a house and make their property. At the same time, the rest argue that more value can be made by SIP and staying in a rented house gives more flexility.
Let us understand with the help of experts and data whether buying a house is beneficial or it is more intelligent to invest in SIP (Systematic Investment Plan)?
What is the debate on social media
Sourav Dutta, a user on X (first Twitter), posted that SIP is beneficial from buying a house. Dutta wrote, ‘When you can rent a house of ₹ 1.5 crore in just ₹ 40,000 months, then what is the need to buy? Let the landlord take tension to repay EMI and you keep SIP comfortably.
There was a variety of response to Dutta’s post, mostly in favor of buying houses. Saurabh Jain, a user, wrote, ‘When the prices of property rise, they turn 2 to 4 times in 10–15 years. The fare also increases in the same proportion. I think property prices may double in the next 2 years. This is due to low interest rate and increase in potential foreign investment (FII). Investment in FII’s stock market can bring bull run and people will start buying houses by selling stocks.
Is the house better?
In Dutta’s post response, most people believed that buying a house is a better decision. His argument was that being the owner of his house gives emotional security and stability. You are not afraid that tomorrow the landlord will say that empty the room. Also, the fare increases much faster than EMI.
One user wrote that the rent grows like a rocket every year and this money becomes air. At the same time, by buying a house, you make a property, whose value keeps increasing over time. EMI is largely stable due to government curb. At the same time, the fare lives on the will of the landlord, which he can increase whenever he wants.
Giving his example, the user wrote, ‘I took 3 BHK near IT Parks in East Bengaluru. The interest rate of home loan from HDFC was fixed at 6.9% for 2 years at the time of Kovid. Now the interest rate has increased to 7.9% as the loan shifted to the repo rate from MCLR. At the same time, about the fare, the user said that the house whose rent was earlier ₹ 20,000, now his fare in 4 years has increased to ₹ 45,000.
Is SIP a profitable deal?
@Gumnaamparindey handle described SIP as a more profitable deal than buying a house. The user wrote, ‘When you have to change the job or city, will you buy a new house every time by selling an old house? In every job of mine so far, I have chosen to stay on rent within a radius of 2-3 kilometers from the office. Yes, there was some problem with the landlords, but the time I saved from the journey got to spend with the family- that was the biggest advantage.
Another user wrote that if you are a bachelor, it can be a good decision to live in a rented house. This will save you from escape under the burden of EMI at an early age. And by staying on the rent, they will also raise a single amount worth to buy the house. However, there is a need for stability in life after marriage and child. The decision to buy a house at that time can be correct.
Expert opinion on SIP vs Home Loan
Colonel Sanjeev Govila (retired), CEO of Certified Financial Planner and Financial Advisor Company Hum Fauji Initiatives, says that buying a house for generations in India has been a symbol of success. But in today’s changing economic environment, the right question is, are you buying to stay at home or for investment? Because as your purpose changes, the correct answer to this question also changes.
If you are buying a house for yourself and you have an emergency fund and family insurance, then buying a house can be a sensible decision. The owner of the house gives emotional security, stability and permanent identity. Especially, for families who have settled permanently in the same place.
Isn’t the house for investment?
Govila says that real estate often does not live up to expectations for investment. Because the cost is very high. Returns from rent are only 2–3%. Also, it is not easy to sell it, ie lack of liquidity. Real estate also leads to compulsion to stay tied at one place. If you have taken a huge debt (EMI) to buy a house, the risk increases further.
Govila believes that instead of investing in the house, SIP gets more flexibility. You can start it with a small amount and increase it gradually. It is also easy to withdraw money if needed. You can get an annual return of up to 12–15% in long term. There is no hassle, there is complete flexibility. SIP fits perfectly for today’s rapidly changing, mobile and uncertain world. Your money keeps growing quietly, and you can focus on your life.
What is the strategy of understanding?
You should decide to do SIP or buy a house according to your need and convenience. According to Govila, you should make assets from SIP in the 20th and 30th decade of the age. When financially strong, consider buying a house- to stay or for heritage. He says that buy your dream house with wealth made from SIP, not by tied to EMI. Because real estate makes status, but SIP creates real wealth.
What does the mathematics of data say?
Now suppose you have bought a house of ₹ 1.5 to ₹ 2 crore. Its EMI is going ₹ 50,000 every month. Or you are investing ₹ 50,000 in SIP. In such a situation, after 20 years, the approximate situation of both options may be something like this:
| Parameter | House |
SIP (12% estimated return) |
| Monthly expenses | ₹ 50,000 (EMI) | ₹ 50,000 (SIP) |
| Duration | 20 years | 20 years |
| Estimated value | ₹ 1.5 to ₹ 2 crore (dependent on location) | From ₹ 5 to ₹ 6 Crore |
| Liquidity | Less | More |
| Tax exemption | Yes (on home loan) | Dependent on funds |
Sameer Mathur, MD and founder of the Roent Solutions providing financial advice, says that the purpose and benefits of buying a house and SIP have different, but each option has its own importance.
He said, ‘In Indian culture, bread, cloth and house are not just needed but symbolizes social and emotional stability. Being the owner of the house is still considered a major achievement. SIP is a structured and flexible way to create financial property. It is understandable that everyone should take a balanced decision keeping in mind their income, need and age stop.
Decision depends on your convenience
If your stability, home and emotional security for family, then there can be nothing better than buying a house. However, before purchasing the house, you should decide that you are fully prepared for it. But, if you have to change the city due to frequent jobs, you can choose to stay on rent. This can give you the convenience of SIP.
According to the expert, many people also balance between the two. For example, by buying an affordable or small house, they fulfill the basic need and put the remaining income in SIP. Overall, you have to take the decision according to your convenience.
Also read: ₹ 1 lakh investment made ₹ 80 crore, father’s decades old share made son rich
Disclaimer: The ideas given on Moneycontrol.com have their own personal views. The website or management is not responsible for this. Moneycontrol advises to users to seek the advice of certified experts before taking any investment decision.