Buy or wait? 6 steps on how to make prudent decision on home buying
Despite having surplus money, many people hold back their decisions on purchasing their dream houses
image for illustrative purpose
Buying a home is the smartest decision to make if one can afford it, and we all know the reason. Home ownership builds equity and net worth over time as the property value appreciates, unlike paying rent which builds no assets. Home loan interest rates are currently still lower than they were before the Covid-19 pandemic. It is by far the most important investment to make to ensure long-term stability, security, and social status for one's family.
An owned home is the ultimate financial legacy to bestow on our children - an asset that grows is value even as it is used to eliminate rental expense and provide a 'home' base and launching pad for all future plans.
And yet, many Indians defer this important purchase even when their finances favour it, even as their hearts yearn for home ownership. What holds them back?
The Faces of Indecision
The uncertainty can have many causes. Often, negative news we consume affects our decision making. Once we believe a negative narrative, the tendency is towards confirmation bias - seeking out information that confirms the negative views. It's a self-perpetuating cycle of negativity which shouts down a positive decision.
There is also anxiety about choosing the right property, location, timing, and stretching finances too thin. In India, it is not uncommon to have grown up in a family which puts a greater weightage on saving rather than investing in growth and a better life.
Whatever the reason or combination of reasons, there are obvious risks to procrastination - the aspiration for home ownership remains unchanged, but property prices and lending rates increase, and good projects sell out.
If you're caught on the horns of dilemma even though your instincts favour home ownership, the challenge is to overcome the mental block. The sales person who takes you for a site visit will obviously do their best to overcome it, but being convinced by a sales pitch is not good decision making. This is a major decision in all respects, and it must be your alone.
Think it Through
When making a decision on a property purchase, you needs to focus on the benefits, not just costs. When we focus more on potential loss than on potential gains - a proven human tendency, by the way - it contaminates the decision-making process.
1. Concentrate on the financial, lifestyle, social, and emotional gains of owning a home. Imagine in vivid detail how much better daily life will be in your own home, where you're in control and not your landlord. Prime your brain to move towards this positive vision.
2. Do the math. Before making your first site visits, prepare a detailed budget and financial plan and convince yourself on paper that home ownership is achievable for you over the long-term. This reduces the anxiety of the unknown.
3. If you've been talking to a lot of nay-sayers, talk to others who have recently achieved their dream of home ownership. Ask them about the process, challenges, and rewards. If you've been engaging in 'catastrophic thinking', this allows you to normalize the experience and make it more real and achievable.
4. Remind yourself that buying a home is far from irreversible. The seeming 'permanence' of owning a home can be scary, when in fact real estate can be sold or downsized if needed. If you've been following the news, you're surely aware that homes are selling readily and at very good prices.
5. If the only professional you have spoken so far is a property consultant, get a second opinion - consult a financial advisor and find out whether home buying fits your situation and budget. Once you're convinced that it does, go back to your real estate agent and give him your list of must-haves for a property, along with your budget.
6. Ignore expectations from those who do not share your life. Don't buy a home or avoid doing so just because society thinks you should. It's your and your family's life, and your decision must align with your family's needs and aspirations.
Long Story Short
- Reframe the whole idea of home ownership in your mind. It is simply a logical next step in life that builds a financial asset and long-term security. As psychologist Abraham Maslow noted, "In any given moment we have two options: to step forward into growth or to step back into safety."
Sometimes, the smartest move is to step forward.
(The author is managing director at Pharande Spaces)
