InvestorQ : As we see world is moving from capex based model of buying cars to opex based model of on-time cabs. Should the same should be repeated in case of homes? (Based on NPV should we buy home or rent )
Aman jain made post

As we see world is moving from capex based model of buying cars to opex based model of on-time cabs. Should the same should be repeated in case of homes? (Based on NPV should we buy home or rent )

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Dia Deshpande answered.
2 years ago
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Let me tell you that the trend is cars is already building and even that trend is started off in the case of homes. In the past, owning a home was the big middle class dream in India and any man or woman who joined a job would first plan to take a loan and buy an apartment. The next progression would be a small car and then a big car. Now that is changing.

Just as Ola and Uber are making a big difference to the auto industry, people are realizing that access to transport and convenience of access is more important than owning a car. That explains this big shift towards people preferring cabs like Uber and Ola to owning cars. There is also the operating lease that is gradually picking up for cars. The person uses the car for around 5 years and then returns the car back to the seller at a pre-decided value. That reduced value is also factored into the lease rentals. The lessor is the owner of the car and takes care of repairs and replenishments.

When it comes to home, it was considered to be a good investment for a long time because home prices never fell. A typical apartment or piece of land purchased anywhere in India would only appreciate over time. Things have changed in the last 10 years. For the first time, people are seeing that the prices of apartments they purchased is going below their cost and that is leaving them negative equity i.e. the value of the loan is more than the value of the house.

That is the reason, more of the young millennials prefer to lease apartments as it does not tie them down to a lifelong EMI and also gives them more flexibility to move around; within and outside the country. This trend has just started in India but expect it to aggressively catch on in the coming years.

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