Shekar · a moment, addressed

Is real estate better than stocks?

The honest maths most property buyers never do

Section 0 · Real moments5 min readFirst-time investorPublished
A traditional Indian clay piggy bank shaped like a house, with a few coins slowly slipping out from a small gap at its base onto a wooden table.
The property math we forget to do

We celebrate the big selling price, but forget the silent leaks of interest and maintenance over 20 years.

Your neighbour bought a flat in 2004. Last year he sold it for more than triple what he paid. At every family dinner, he calls it the best decision of his life. Nobody asks how much interest he paid on the home loan across those twenty years. That question makes people uncomfortable.

Real estate feels safe because you can see it and live in it. That feeling is real. But 'feels safe' and 'is safe' are not the same thing.

The true return on a property is not sale price minus purchase price. First subtract all the loan interest paid. Then subtract stamp duty — 6 to 8 percent upfront in most Indian states. Then subtract twenty years of maintenance. The final number is almost always smaller than the dinner-table story.

Rental yield on residential property in Indian metros is just 2 to 3 percent of the property's value. A home loan costs 8.5 percent or more. So the rent may come in slowly, but the EMI goes out fully and on time. That gap comes from your own pocket.

Equity via SIP starts at ₹500 per month. It is far more liquid than a flat because you can usually redeem in parts instead of selling the whole asset. The Sensex has compounded at roughly 14 percent per year over 45 years. Real estate is not automatically worse. But the comparison has to be honest.

Rental vs Loan.The Metro Gap
Average rent you receive: 2-3%. Home loan interest you pay: 8.5%+. The difference comes out of your pocket every month.
Analogy

One flat key, one SIP debit

In 2004, Raju bought a flat with a home loan. Priya took the same down payment and the same monthly outflow and put it into a SIP. Raju's flat had a big number on paper, so every price rise felt exciting. But his loan passbook had another story: EMI interest, vacant months without rent, society charges, repairs, and stamp duty already paid. Priya's SIP did not give her a key to hold, so it felt less impressive at family dinners. But there was no EMI chasing her every month. Raju's loan magnified the property gain and the cost. Priya owned small pieces of businesses, and the money compounded quietly.

Why this matters

You may already own property. That decision isn't wrong. Location, timing, and disciplined leverage have created real wealth for many families. What matters now is that you don't spend the next twenty years with the same incomplete maths. Every future rupee you commit to property or equity should be a deliberate choice, not a default assumption that one is automatically safer than the other.

Where people go wrong

  1. Sale price minus purchase price equals profitThat ignores decades of EMI interest. A ₹50 lakh loan at 8.5% over 20 years accumulates approximately ₹54 lakh in total interest — nearly equal to the principal you borrowed.
  2. Rental income is pure profitRental yield in Indian metros is 2 to 3 percent of property value. Your loan costs 8.5 percent. Vacant months, maintenance, and property tax can consume whatever remains.
  3. Comparing leveraged property gains to unleveraged equityLeverage magnifies returns — and risk. A fair comparison puts the same rupees out of pocket each month into both options, then counts what each one builds.
  4. 'I can see it and live in it' means my money is workingTangibility gives comfort, not return. Your money works when it compounds. A flat earning 2 to 3 percent rental yield and costing 8.5 percent in loan interest is not automatically compounding your wealth.
If you only remember three things

  1. Property return = price rise minus loan interest, stamp duty, and maintenance.

  2. At 12%, ₹43,000 per month becomes ₹4.3 Cr over 20 years — the same cashflow as a home loan EMI.

  3. Illiquidity costs money. You cannot sell 10% of your flat for college fees.

People remember the sale price because it arrives as one big number. They forget the EMI interest because it left quietly every month for twenty years. That is why property returns often look larger in memory than they were in real life.
Shekar
Neighbour
Sold my flat for 3x the price! Best decision of my life! (Note: Don't calculate the 20 years of EMI interest I paid 😅)

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