Why SRK’s home-buying guide doesn’t apply to everyone

“Yes Ma," replied Vivaan, who works as a junior-level manager with a fast-moving consumer goods company. “That’s all me and Mairaa can afford right now."

“But where will me and your father sleep when we come to visit you?"

“Of course, in the bedroom Ma," said Vivaan maintaining his cool and at the same time hoping that this daily video call with his mother would come to an end soon.

“And where will you guys sleep then?"

“In the living room," explained Vivaan. “We will use the sofa-cum-bed that we have."

“And what will happen if Mairaa’s parents also come visiting at the same time as us? And what happens when you have children?"

“Oh, that I hadn’t thought about that," said Vivaan, not having the heart to tell his mother that he and Mairaa didn’t want to have children. But that was not a conversation to be had on the phone.

“What will you do without me my baccha?" the mother asked. “Okay, now hand over the phone to Mairaa. Let me talk to her. No use talking to you."

Vivaan handed over the phone to Mairaa and walked into the kitchen to make coffee. Mairaa has been working in the information technology sector for nearly half a decade.

“Hello, Mummy ji," said Mairaa, putting more emphasis on the ji than she normally would.

“Tell me something Mairaa. What do you think of Shah Rukh Khan (SRK)?"

“SRK is the love of my life Mummy ji," replied Mairaa, almost instantaneously, and then regretting it. “Of course, after Vivaan."

“So, I was recently watching an interview with the actor Rajkummar Rao on YouTube."

“Oh," replied Mairaa, wondering where this was going and cursing all the mobile phone companies offering cheap internet connections, which had made all mothers social media savvy.

“In that interview he shared something that SRK had told him."

“Hmmm."

“Basically, SRK told Rajkummar that “Beta kabhi bhi ghar lega na, toh aukaat se thoda zyaada lena, kyunki phir na, upar wala bhi dekhta hai aur tu khud bhi zyada mehnat karega," meaning that whenever you buy a house buy something which is beyond your reach in terms of price because then God keeps an eye on you and you will also work harder."

“That’s interesting Mummy ji."

“So, you guys should buy a bigger flat. A one BHK flat is too small. You should at least buy a two BHK, so that when we and your parents come visiting at the same time, at least everyone has one room to themselves," Mummy ji explained, making what she thought was a rather obvious point.

“But Mummy ji we can’t afford it," replied Mairaa.

“Oh beta, remember what SRK said. It’s good to stretch yourself financially while buying a house," Mummy ji replied affably. “Chalo I need to start cooking dinner now."

Rarest of rare

The video call ended and Vivaan walked into the room with two cups of coffee in his hand. It was a new blend that he had just bought earlier in the day.

“The coffee is nice," said Vivaan, taking a sip.

“Is it?" replied Mairaa, slightly irritated.

“What Mummy was saying makes sense yaar," having overheard some of the conversation.

“When was the last time when your mother said something that didn’t make sense to you?"

“Come on," replied Vivaan. “I am her only child. Cut her some slack. Also, what was the SRK bit she was telling you about?"

Mairaa recounted the conversation.

“So, how do we approach this?" asked Vivaan.

“Well. People make sense of their lives through their limited experiences," said Mairaa.

“Yes," replied Vivaan wondering where this was going.

“And what SRK told Rajkummar was from his own experience of buying Mannat, a very expensive house, and then paying for it."

“Probably, yes."

“SRK is one of the most successful actors that Indian cinema has ever seen. His kind of success is the rarest of rare. And given that what he has learnt from his experience cannot always be applied to the world at large and especially people like us."

“Yes."

“So, while SRK was right in sharing his experience with Rajkummar, who is a relatively successful actor, but Mummy ji using that example for us and nudging us to buy a bigger house, doesn’t really work."

Many streams

“Now who would have thought that a day would come when Mairaa wouldn’t agree with something that SRK said," remarked Vivaan.

Mairaa ignored this comment and continued. “Also, successful actors can make money in ways other than just acting. They can have a stake in a film’s profits. They can do advertisements and get paid pot loads of money for it. They can attend corporate events, weddings and other family functions, and charge money for it. And they can even make money from social media these days. In fact, there is one school of thought which suggests that acting is something that simply keeps an actor’s brand going and they can use it to earn much more money through other avenues."

“Yes."

“So, the point is that actors have ways and means of making more money through avenues other than just acting, allowing them to really stretch things financially while buying a house. Now, that’s not true for you and me simply because we hold normal corporate jobs in sectors where salaries don’t go up at a fast pace," explained Mairaa.

A former boyfriend had taken pains to explain the basics of personal finance to her. She had taken an interest and learnt a lot about the different aspects of money.

“I guess that makes sense," said Vivaan.

“Also, if we stretch ourselves completely, almost all of our income left after expenditure will go into repaying the EMI on the home loan, and we won’t be able to save and invest much. Further, we will have to use a greater proportion of our savings towards making the down payment and perhaps even furnishing the flat. And given that we want to exit this rat race in a few years, money in the bank and other investments are very important for us."

Control the controllable

“Makes sense," replied Vivaan, sipping coffee. “But you know I was watching TV the other day and one expert said that home loan interest rates are on the higher side and are likely to fall."

“Let’s try and control the controllable V," said Mairaa, still not having touched her cup of coffee.

“Control the controllable. I have heard M.S. Dhoni say. But what does that mean?"

“Inflation has been on the higher side since the end of 2019. In 2020-21 and 2021-22, consumer price inflation was at 6.2% and 5.4%, respectively. In 2022-23 and 2023-24 it was at 6.7% and 5.4%, respectively."

“So, what’s your point?" Vivaan interrupted.

“As long as inflation is high, home loan interest rates will remain high. As of now they are around 9-9.5% depending on your profile and which bank or home finance company you go to for a loan."

“Hmmm."

“The point I was trying to make is that even the Reserve Bank of India (RBI) hasn’t been able to predict which way inflation will go. Over the years, the RBI has said several times that the inflation is transient. But if inflation was transient, how has it remained at high levels for more than four years now, is a question well worth asking."

“Fair point."

“So, if the RBI has very little idea of which way inflation and hence, interest rates are headed, how can you and I have any idea."

“Which is why you said let’s try and control the controllable."

“Yes. What we can control is the amount of home-loan we take and be in a position to continue repaying that loan even if interest rates were to rise further," explained Mairaa. “If they fall, good for us."

“Makes immense sense," replied Vivaan.

For relatives & friends

“There’s another point I wanted to make."

“Go on."

“See, both of us want to get out of the rat race. And we can’t do that unless we have fully repaid the home loan. In order to do that we will have to keep prepaying the home loan. So, the larger the home loan we take on, the more time we will take to prepay it."

“You have really thought through things."

“Even breakups have their benefits," replied Mairaa, thinking about her ex and trying to sip some coffee, which had gone cold by then. At that point her phone rang. It was her mother video calling.

“Your mother-in-law just called," Mairaa’s mother said.

“Ah. Bad news travels fast," replied Mairaa.

“How can you even think of buying a one BHK Mairaa?" her mother said in a very agitated manner. “That Sharma ji ka ladka (Sharma ji’s son) just bought a two BHK last week."

“It’s simple Ma. That’s all we can afford."

“But beta it’s time to get settled in life and at least buy a three BHK." And so their conversation continued. After a point Mairaa just gave up and decided to let her mother do all the talking and wondered if her mother and her mother-in-law thought that she and Vivaan had access to a money printing machine. Meanwhile, Vivaan went into the kitchen again to make a fresh cup of coffee for his wife.

Five minutes later, Mairaa was done with the rather inconvenient call and was enjoying the fresh cup of coffee: “You know V, no one tells you that personal finance means that things will get really personal and that families will get involved."

“Ha ha."

“I have thought a lot about this. Our parents’ want to know all about the kind of money we make. They also pushed us towards buying a car on a loan, which we rarely drive given that both of us hate driving, and instead we prefer taking an Uber. I mean I just couldn’t explain to our mothers that buying a depreciating asset, which a car is, on a loan, isn’t really the done thing."

“Hmmm."

“Now, they are pushing us towards buying a bigger flat. But in all this they have never really asked us how well our investments in shares and equity mutual funds are doing. Or how well our investments in sovereign gold bonds have done. Or the fact that our emergency fund—which consists of savings deposits and bank fixed deposits—is now at nearly 12 months of our incomes. Why is that?" asked Mairaa.

“Interesting question," replied Vivaan. “You tell me."

“I guess they can talk about our salaries, our car and our future bigger home, to our relatives and their friends. It gives a meaning to their lives. They can show the pictures of our foreign holidays, our car and hopefully our home. All it takes is a WhatsApp forward. At the end of day, talking to relatives is also about one upmanship. But what do they do about our investments in stocks, mutual funds, gold and fixed deposits? That they can’t show off."

“Makes sense," replied Vivaan. “But isn’t that a rather cynical view of our parents?"

“It is what it is V," she replied. “Just because they are our parents doesn't mean they are perfect."

“Hmmm."

“You know there is something else that is bothering me."

“What?" asked Vivaan, slightly fed up with the fact that this conversation was making an already very humid evening even worse.

“Artificial intelligence."

(The example is hypothetical).

Vivek Kaul is the author of Bad Money.