This article talks about Should you even consider a self-occupied property as investment? The eye-popping returns given by real estate in last decade or so have made it very common for people to look at the real estate as a good investment option. And this is inspite the high costs of entering the investments and need to borrow for the same.
Nevertheless, there are many examples of people multiplying their wealth even after investing in real estate on borrowed funds.
But what about your own house? You also took home loan to purchase it and have been regular in your EMI payments. Fortunately, the value of your house has increased too. So is it a good investment? Though you might be tempted to say yes and others too will agree with you, fact is that it is not entirely correct to call a self-occupied property as an investment.
House on Home Loan as Investment
The reasons are fairly simple. Will you sell your house if it appreciates more in value? Chances are that you won’t. So you will not be realizing your paper profits anytime soon. Even if you were to sell this house, you will need to purchase another one. So money goes from one locked investment to another. Next comes the question of recurring income. Since you occupy the house, there is no question of rent generation. Isn’t it?
Real estate no doubt is an asset class. But for all practical purposes, the house you occupy is not an investment. Don’t worry. You can continue to brag about its appreciating value when amongst friends. But you need to understand that this appreciation is value is not available to you that easily.
This is a very important point to be remembered by everyone. But most people continue to count the value of their house in asset section of their personal balance sheet. Even though it is correct mathematically speaking, it does not hold much significance under practical circumstances.
