Recently I shifted from Kalyan to Mulund. I’m paying over 50K rent for a 3BHK. When I told this to a friend, she felt it was too much. Not because she calculated anything, just a gut reaction: “Paying so much rent feels wrong.”
So I asked her two factual questions:
- Where do you stay?
- What is your house worth?
She stays in Santacruz in a house worth roughly 2.5 crore. Then I asked her to momentarily pause emotions and look at arithmetic. Assume 2.5 crore is invested conservatively at 6% annually. That generates about 15 lakh per year, roughly 1.25 lakh per month before taxes. The opportunity cost of owning that house is almost double my rent, every single month. But because this money does not visibly leave the bank account, it is ignored. That blind spot is called opportunity cost.
Most housing decisions in India are emotional decisions disguised as financial wisdom. This post is not about rent versus buying a house. I have already shared a mathematical model for that earlier. Comment “model” if you want the math. The sole intent of this post is to expose how feelings dominate financial judgement. Ownership feels smart. Rent feels wasteful. Even before a single number is calculated!!
Originally posted on LinkedIn.
