Renting Vs Buying Debate: Zerodha's Nikhil Kamath Shifts Stance; Buys His First House

Although Kamath has long defended renting for its flexibility, he acknowledged a significant drawback: the uncertainty of when one might need to move out

Nikhil Kamath, co-founder of Zerodha and a prominent advocate for renting over buying, has recently made a surprising shift by purchasing a house. Kamath, who has long championed renting as a more flexible and beneficial option, shared insights about his decision in a recent episode of his podcast, "WTF is with Nikhil Kamath." 

In this episode, he was joined by real estate experts Irfan Razack, Chairman and Managing Director of Prestige Group; Nirupa Shankar, Executive Director of Brigade Group; and Karan Virwani, CEO of WeWork India. Together, they reignited the debate surrounding the merits of renting versus buying property.

Although Kamath has long defended renting for its flexibility, he acknowledged a significant drawback: the uncertainty of when one might need to move out. “The thing with renting, of all the advantages of renting, there is one disadvantage: you don’t have foresight as to when you can move out of the house. I had to move out of this house, whereas I might have liked to stay longer in this house,” Kamath explained.

When asked about the financial benefits of buying a home, Kamath expressed his concerns regarding the illiquidity of real estate investments. “I feel something like gold can give that to me. I hate the illiquid nature of real estate. Places like this have fewer buyers and if 10 people decide to sell, then price goes haywire, and pricing is very arbitrary in nature,” he explained. In contrast, he noted that the stock market benefits from a larger pool of buyers and sellers, which fosters more stable pricing dynamics.

Kamath further criticised the financial burden associated with purchasing property, particularly highlighting the high stamp duty costs. “In stock market, I can buy and sell without paying 5 per cent to 6 per cent stamp duty,” he noted. The podcast discussion also explored the profitability of buying property to rent out. Kamath expressed skepticism about the returns of this strategy, especially when factoring in inflation and interest rates. “I think nobody makes money from buying and renting a place. You do not have occupancy throughout the year for something like AirBnB. Accounting for inflation and interest rates, the return on this investment is negligible,” he asserted, reflecting concerns about the limited financial benefits of these ventures.