‘I rent for ₹1.5 lakh/month, math of buying doesn’t work for me’, says Bombay Shaving Company's Shantanu Deshpande

Shantanu Deshpande (pictured) also expressed his preference for investing in the public market, citing better liquidity compared to real estate.

Bombay Shaving Company founder Shantanu Deshpande shared his insights on the renting vs buying debate regarding houses.

Deshpande’s personal decision came up during a conversation with Hyderabad-based real estate entrepreneur Ajitesh Korupulu. The latter was a guest on Deshpande’s YouTube channel for a podcast on investing money in real estate.

Korupulu raised the argument that paying loan EMIs instead of rent leads to asset creation over time. He pointed out that for working professionals, real estate serves as an asset, and suggested that redirecting rent towards EMIs could lead to asset accumulation.

Explaining why a family would choose to buy instead of rent, Korupulu said, “Let’s say you’re paying a rent of ₹1 lakh rupees … and even if you pay this rent for 10 years, you’re not creating any asset. Whereas, when you pay EMI, you’re going to create an asset… when you want to retire or lose your job, nobody will come and throw you out of your house.”

Explaining the reasons

But Deshpande countered this viewpoint. He shared that he resides in a prime location in Gurgaon, paying a monthly rent exceeding ₹1.5 lakh, adding that the financial dynamics in the city didn’t align with a buying strategy.

Detailing rental expenses, the premium nature of his accommodation and its market value, Deshpande explained that purchasing the property would entail significant loan leverage, resulting in EMI payments far surpassing his current rental costs.

Additionally, Deshpande expressed his preference for investing in the public market, citing better liquidity compared to real estate. He noted that allocating funds towards public markets allowed for asset growth without the liquidity constraints associated with fixed assets like property.

“But the math doesn’t work for me… maybe Hyderabad is different. I’m paying ₹1.5 lakh of rent including maintenance, golf course, premium play, etc. The apartment I live in is worth ₹7.5-8 crore, so if I were to buy it and leverage 6.70 percent of it, my loan would be ₹6-7 lakh per month — which is four times the rental cost. So, I’m living in a house that is one-fourth the EMI cost… it would make sense that if I’m earning that ₹6 lakh EMI, I might as well put into public markets and build asset there,” he said.

Further, Deshpande said rented afforded him freedom of mobility. He noted the ease of relocating within a short timeframe, contrasting it with the more cumbersome process of buying and selling property. He also championed the convenience and flexibility of renting, despite it not aligning with traditional asset-building strategies.

Bombay Shaving Company Performance

Based in NCR, the start-up saw a significant increase in its net loss for the financial year ending March 31, 2023, as per an Inc24 report. The company’s net loss soared to ₹80.2 crore in FY23, which was 1.8 times higher than the ₹43.3 crore loss recorded in the preceding fiscal year.

Despite the rise in losses, the startup’s sales approached the ₹200 crore milestone, and operating revenue of ₹177.3 crore in FY23, marking a 69 per cent increase from the ₹105 crore recorded in FY22, it added.

Bombay Shaving Company primarily generates revenue from the online and offline sales of its products. When factoring in other income streams, its total revenue surged by 71.7 per cent to ₹182.4 crore during the review period, compared to ₹106.2 crore in the previous fiscal year, the report said.