CapitalMind CEO Deepak Shenoy calls houses, most cars a ‘terrible investment’; here's why

Rents in India’s technology hub of Bangalore have nearly doubled since the start of last year, making it the country’s hottest residential market. Landlords in the city, often referred to as India’s Silicon Valley, now charge the highest proportion of their property’s value as rent, edging out financial centre Mumbai, according to data from market researchers.

Amid this, Bengaluru based CapitalMind CEO Deepak Shenoy has called called investment in houses and most cars a ‘terrible investments.’ He added that the purchase is overshadowed by the warm fuzzy feeling of ownership, most of the time.

In a tweet, the CEO wrote, “This buy vs rent will never go away, as if its some kind of religion. No one cares. Most people want that warm fuzzy feeling of ownership, so buying is good. Like a car.”

He added that people confuse it for investments giving some random examples. “Both up and down. Or quote high rents or low rental yields. These are financial comparisons - and houses have mostly not worked out well in the last decade financially. They miss the point.”

Calling houses a terrible investment, he said, “Houses are terrible investments, like most cars; but that is overshadowed by the warm fuzzy feeling of ownership, most of the time. This includes the ability to change the structure of your house the way you like it, to apply for passports with a "permanent" address, to not have to deal with rentals and brokers etc."

He further added that so a person should just buy only when you can afford it. 

“Buying a house is mostly about owning something. The EMI is your cost of that warm fuzzy feeling, and so you should just buy when you can afford it. You can never justify why a Mercedes (or a Porsche) is a great idea, but they are not evaluated on boss what crap mileage it gives and boss big deal you could take uber and it would be cheaper forever.”

"It's evaluated on Frik, I own a goddamn mercedes, biyatch. That warm fuzzy feeling justifies any darn EMI, but only if you can afford it which means either you have the money or less than 30 percent of your income goes to pay EMI.

Responding to his tweet, some users agreed with him while some disagreed. One user wrote, “Your EMIs must be low in comparison to loan originations for flats now. On an average housing prices are up 40-50% above 2011-12 levels”

Another user commented saying, “I mostly see people giving arguments of renting who mostly don't have it or have limited amount. Who have it they just spend. The smartest investor the country had bought a 1000 cr bungalow few years back. Mumbai is filled with such fellows and they are really very smart." Responding to him, Shenoy wrote, “Because he can afford it. That smart investor bought a 1000 cr. bungalow without thinking how much his EMI will be. Be like that guy, no. Get 5000 cr. and then spend 1000 on some bungalow.”

Another user wrote, “Yep, buying a house is an emotional decision not financial. I have one because it gives me peace of mind.”

Some other wrote, “The warm fuzzy feeling chains you to a job for the next 20 years and reduces risk taking ability.”

Some other wrote, “The rent I earned from my houses more than paid my EMI after the first couple of years. While rental yields at current prices hover around 3%, when compared to your buy price, the yield is way better than the best of asset classes. People forget that land is scarce”

“Historically, land has worked really well as an investment? Also, flats did really well for around ten years, starting from 2003 or so. Lastly, even now, some areas in blr seeing 10% + cagr for flats in some areas.”

Some other commented, “Maybe some buy houses for passive income of rent. I agree they should only buy when they can afford rather than burdening themselves by paying 1.5x for something that may even be 0.8-0.9x in few years.” Some other questioned, “In a world where one can work out of anywhere and people change jobs so often, does it really make sense to get stuck in one place by buying an apartment?”

Another wrote, “I think one should definitely go for that warm fuzzy feeling if difference between EMI and rent is small.”

This is not the first time Shenoy has been against investment in houses, last year in April, the CEO had said that all his personal investments are in equity and debt in the ratio of 85:15. He had said that he doesn’t invest in gold or own a house. “I even don’t plan to own a house. I also don’t like gold and I don’t like real estate. I am a financial asset guy and not a real asset guy," he had said.

Meanwhile, the capital of Karnataka state is home to over 1.5 million workers including those for global firms like Alphabet Inc.’s Google, Amazon.com Inc., Goldman Sachs Group Inc. and Accenture Inc. That population was displaced during the pandemic, with staff moving to remote work or departing the city, pushing rents down. Anarock’s data shows rents in various Bangalore neighborhoods have jumped by double digits since 2019, echoing a wider surge across India’s major cities. But Bangalore’s more recent cost increase is larger because it took a bigger hit from the pandemic, market observers say.