So you’re looking to buy a home. Should you think like SRK or Warren Buffett?

A report by Anarock found the demand for 3BHKs has now surpassed that of 2BHKs, and the sale of high-end apartments (above Rs.1.5 crore) has increased nearly four-fold since 2021. Meanwhile, demand for affordable housing (below ₹40 lakh) fell to 21% of homebuyers in the second half of 2023 from 25% in the second half of 2021 and 40% in the second half of 2020.

Warren Buffet, however, takes the opposite view. The world richest investor hasn’t upgraded his house since 1958. He famously said, “I could buy any house in the world and I don’t want any other house than the one I’m in.”

Also read | Reel estate: Meet the Instagram-savvy property agents changing how homes are bought

This is the story of three families who are firmly in Buffett’s camp – for now, at least. They’ve all decided against moving into a bigger house immediately, and plan to use the money to travel abroad, buy a better car, or invest more in mutual funds.

Peer pressure

When the Prestige Group launched a new residential building in Bengaluru, 47-year-old Manish Jain was added to a WhatsApp group with 11 of his friends. They all discussed one thing – should they book a flat in it?

Jain, who has a job in the private sector, lives in a 2BHK apartment with his wife – a home-maker – and their 13-year-old daughter. When friends visit, their daughter sleeps in their room. But as she’s grown older, they’ve been thinking about moving into a house with three bedrooms.

His friends suggested that he book a 3BHK flat in the new building, saying he could sell it at a profit if he decided against moving in. Jain recently finished paying the monthly instalments for his current home. The 3BHK he was planning to book was priced around Rs.2.5 crore, with a ₹35 lakh booking amount and a monthly payment of around ₹2.5 lakh.

He filled out the form and even paid a small signing amount. But before proceeding, he asked himself if he really needed a bigger house or was just giving in to peer pressure.

Also read | Regulating real estate: Tips from Maharashtra

He discussed the issue with his wife, and they realised they didn’t want to get into another cycle of monthly home-loan instalments, having just emerged from one. When they told their daughter about the plan to move to a new locality, they found she wasn’t too keen either as it would mean losing her friends.

The couple reconsidered, and decided it would be better to buy a new home when their daughter was in the 12th standard. By then they would have a better idea on how much her higher education would cost, they reckoned. “I would rather make a decision when she makes up her mind on what she wants to do. By then she may also be living in a hostel, so the dynamics will have changed,” he said.

The couple also didn’t want to take any big risks in case the economy or the company he was working for went south. And as far as guests were concerned, they realised that they shouldn’t plan a house purchase around friends who would be there for just 10 to 15 days a year. “I might as well book them a room in a nearby hotel if required,” he added.

He also realised they would be able to buy an even better house four to five years down the line by accumulating a large corpus. Jain and two others in WhatsApp group opted, while the rest went ahead and booked flats in the building.

Want vs need

Yashaswi Jain, 40, and his wife live in a 2BHK flat in a Jain-dominated neighbourhood in Bengaluru that has plenty of vegetarian restaurants. But when a new building came up in the locality, they wondered if they should upgrade to a 3BHK apartment.

The couple has two boys, aged 10 and 6. They reasoned that their sons would soon be adolescents and want their own space.

But there was a problem. Their flat was worth about Rs.1.5 crore and the 3BHK they wanted to buy would cost Rs.2.4 crore. Even if they sold their house, Jain would still need to come up with another ₹1.10 crore – ₹90 lakh for the flat itself, ₹10 lakh for registration, and another ₹10 lakh to spruce up the interiors. That meant he would need ₹25-30 lakh for a down payment and a ₹75-80 lakh home loan.

Also read: Real estate, data, stories, and stories that sound like data

The kicker was he was yet to pay back about 10% of his current home loan. “The idea of taking on another big loan didn’t sit right with me. I have been working hard to clear my current one. That’s when he stopped and asked himself: do I really need a bigger house?”

“Peace of mind is more valuable than an extra bedroom. I realised that upgrading my lifestyle doesn’t just mean upgrading my house. It means taking better vacations, driving a nicer car, giving my kids the best education, and having the freedom to enjoy life without financial stress. In the end, staying in my 2BHK wasn’t about settling. It was about making a smarter choice for a peaceful and balanced future.”

He said he would think about buying a bigger house when his mutual fund portfolio touched ₹2 crore.

Biting off more than you can chew

For 38-year old Nikhil Taxak, who works for a pharma company, moving to a different home was not about having more space but access to better amenities than his present government housing society in Gurugram offers. He and his wife wanted to live in a society with a clubhouse and a swimming pool for their four-year-old son. 

Their current 3BHK, which only has a small garden, was bought by his parents when his father worked as a government official. So in 2021 they started looking for an apartment in a high-rise building with modern facilities. They wanted a 3BHK as their parents come over every summer and stay with them from March to October. They also needed a room for work/study – both husband and wife regularly work from home – and for performing pooja.

They expected property prices to be depressed because of covid but when they enquired about the price, they were disappointed. Even a flat in a nearby cooperative government housing society with none of their desired amenities would cost Rs.1.8 crore, so a high-rise with a swimming pool and clubhouse would have made an even bigger hole in their pockets.

Also read: Many investors believe you can’t suffer losses in real estate. That’s just false.

Taxak joined the corporate world at 29, after completing his PhD. Since he was not a chartered accountant and didn’t have an MBA from a top college, his starting salary as a consultant in the pharmaceutical industry was not that great. His wife, who works for a different company in the pharma industry, has a postgraduate degree.

So instead of buying the house in 2021, they decided to give themselves five more years to invest aggressively and build up a corpus of more than ₹1 crore. By FY27, if the markets are kind to them, they’ll be able to use ₹80 lakh from this corpus as a down payment and take a loan for the remaining amount. Their combined corpus is currently ₹68 lakh and they invest Rs.1.8 lakh every month. They’re also hoping their salaries will grow significantly by then, allowing them to invest more aggressively for retirement and their child’s education.

So, what should you do?

The decision to buy a home has a huge emotional component. If you’re thinking about doing so, Viresh Patel, a certified financial planner, recommends dividing the process into two parts.

• First, have a detailed discussion with all family members and make a list of reasons why each of them would or wouldn’t like to do so. Evaluate each reason carefully, and set lower and upper limits for how much you’re willing to spend.
• Next, hire a financial planner to help estimate your cash flows, a RERA-certified advisor to find a suitable home, a CA to understand various tax implications, and a home-loan advisor to get the best deal.