Jagoinvestor
March 26, 2012
Does Home Loan kills Enterpreunership ? May be YES
Who doesn’t want to start some venture of their own? Majority of the people are in jobs and a big number of people do not like what they do. If they had a choice, they would really run away in this very moment. But our responsibilities in life and the situation we create for ourselves makes sure that we are stuck and can not get out of the rat race. We see so many people who want to work in start-ups, many people who really want to do something which they really love and enjoy even if it does not pay a lot but it’s not possible for lot of people to simply quit and start something of their own. Today we are discussing if home loans are a big killer of entrepreneurship which lot of Indian’s have in them?
We all know flipkart.com – One of the co-founder of the company, Binny Bansal made an interesting comment that – Home loan kills entrepreneurship.
India is definitely happening and there are a lot of opportunities in different fields. If you are thinking of starting up, this is the best time. But don’t take a home loan,that actually kills entrepreneurship. You can never get out of it. – Binny Bansal , co-founder flipkart.com (via)
Home loan is a big commitment, especially in a family where there is one earning member. People take jobs, get married, get a home loan, car loan etc, have kids in between and life becomes so “formula driven”. Income has to be earned and expenses have to be taken care. Risk of job loss, income loss due to medical emergencies and similar kind of risks are on the minds of a people who are paying for home loan – and this pressure kills the dreams of doing something of his own and the natural thinking then becomes – “Not an issue – Let me earn for next X years and once I retire, I will live all my dreams”. I am not sure if it really works at the end or not.
There can’t be a bigger liability than owning a house on Loan
Santosh Navlani of moneysights.com confirm’s in one of this comments, that saw same kind of thing while he was hiring people.
I am an entrepreneur & meet many people who at times are potential employees for my start-up venture. Now, most of these house-owners even if they are “excited & thrilled”, don’t join a start-up which would offer them great earning potential in the future because of the uncertainties that a start-up job brings to their income. Simply because they have a huge liability!
If one factors the cost of “forgoing” the pursuit dreams, I guess there can’t be a bigger liability than owning a house on loan. I have seen people getting stuck in wrong jobs where they sacrifice their long-term future by satisfying the urge of saving the rent. And yes, you don’t decide to pursue a dream of start-up or a job-switch by thinking extremely hard on it. It just happens that you are not able to take the job anymore. The last thing one wants then is fear of home-loan coming in way.
So what you do if you are young enough, unmarried and want to taste entrepreneurship? This is the right time to take the plunge and take the risk, so that you have that cushion to come back in the game if you fail. Once you take a home loan and are married, life is full of commitments and you will not be excited enough to start something on your own or join a more fun (low paying – at least in starting years) job. One of the friend who didn’t want to reveal his identity shared with me on facebook.
When I was 25, working as a software engineer at Hexaware Mumbai in 2002, earning Rs. 25,000 per month, I quit my job and went to Goa, following my dream and started a completely new career stream at an income of Rs 4,000 p.m. At that time, I was single, did not have any home loan or other commitments and that certainly helped otherwise I may not have been able to take that jump.
Interestingly, when I met a few ex-colleagues from software industry recently, to my surprise, I figured that not only I earn more or equal to them, but am also much happier because I am enjoying what I’m doing. They confessed to not enjoying their jobs and feel that as software professionals working late nights to meet client calls in US, long daily commute to office etc. they felt as though 10 years of their personal life was “sucked” by their jobs.
Conclusion
There is saying – “If there is a will, there is a way” and a lot of people I talked about on this topic, said that if a person has the guts, vision and passion, he can make it real, even if he has huge debt!. But we are talking about the masses here (majority of people) and for most of the people it’s really difficult to take that kind of risk, even thought they have huge passion and mindset- their situation just does not ALLOW IT. Do you really agree to it ?
Would you like to share about your experience and thoughts on this topic ? Do you really think that home loan (or any such kind of huge responsibility) really kills entrepreneurs and stops people to explore low paying but hugely satisfying careers ? Really ?
I am also trying to start my own venture since a long time but being an average software engineering professional who is so attached to his job that didn’t change company since last 9 years its not a easy task for me. Now after getting some onsite opportunities I could be able to almost pay off my loan & hopefully be end of 2016 I will be loan free.
Now I can think to pursue my dream of becoming big some day.
But I whole heartedly agree this home loan is dream killing machine. But never bury your dreams keep them alive & fueled you will be able to pursue them someday.
Thanks for sharing that Neeraj
Very well written article Manish.
Glad to know that Spandan ..
Interesting blog: Let me tell what I did to save myself from home loan and fund my dream venture. I did bought plot near Pune, around 3KM away from muncipal. The area falls under grampanchayata. I built a small bunglow and rented it. It is giving 60% of amount that I pay as rent in Magarpatta. So I have feel and proud that I won a bunglow as well as I stay in posh area like magarpatta. With in 4 year I closed the plot cost and construction cost which I borrowed from my relatives and my gold loan. Now I am EMI free and building fund for my dream venture. Again It is my individual case. while people are paying EMIs and I am saving same amount for my venture is worth to be happy.
Great a great trick 🙂 .. thanks for sharing it !
Its really true……its as good as entering into new life…….where risks are more which you can tackle if and only if you have less bills to be paid up……will be taking up this path just because this reason
Good to hear that Praveen !
I have read this article today only but sold my house last month ,after 7 years and I discovered my own reason was almost simillar to the one mentioned in this artcile 🙂
Anybody in this forum, if you want a startup member , please let me know.
Thanks.
Good to hear that . why did you sell the house ?
There’re couple of reasons, most importantly, wanted to be a debt free for venturing into other areas, overall downturn in the realty market, have cash and pick a good deal at bargain price 🙂 Thx.-Raj.
yea .. its very important that one gets out of debt before venturing out in something , In my next post, this is one point ! .. i will quote your remarks there 🙂
Good to hear that .. Goodluck to you
Nice article! I have one question. Is it good to pay your home loan as you save some money? I am confused that should I pay some part of my homeloan or spend that money in some immediate need like home furniture, car purchase, gold etc?
Anagha
HOme loan clearance can be done is emotionally you are more comfortable without a loan on your head, but as far as you are able to service it, you can just go ahead!
Sorry, I meant “commend”….
Thanks Manish for your reply. And I wholeheartedly comment you and Nandish for helping people find those ways:)
Thanks 🙂
Hi Manish
Interesting post. While everybody has focused so much on the aspect of having a liability (loan), I think there has to be some discussion around expense management too….
Agreed, there is a liability – but all one needs is 2/3 years of (living expenses + EMIs) in your bank account and then make a start. So, for building this corpus, one might have to wait 1,2,3 years and that is a test of patience…
I have a few thoughts that I think might add value to the insightful discussion:
a) Settling down expectations with family (especially spouse), that the cushy life may not be that cushy for next 5-10 years….we might not be able to go to a single vacation!
b) Preparing a detailed cash flow statement in Excel setting down clear saving goals and setting aside the amount for each month – (if one has a home loan with SBI Maxgain, one can transfer the amount to be saved in the Maxgain account at the start of the month)….
c) Now, if your savings are not enough, there are 2 options – move into a good paying job…a switch can lead your take home increase to 15-20% or aggressively cutting down on expenses or a combination of both…
d) Maintaining a daily expense tracker – so that one becomes aware of your discretionary expenses…spending less on eating out, getting down from auto a km/ before and then walking to save a few rupees, child can be admitted to a SSC school instead of IB school….(this can really test how much one is committed towards the goal)
e) And yes, since it can be another painful 2-3 years till you reach the goal, to counter the frustration, one can start helping out people for free and building good will in the process (I read a great article in HBR on the power of small wins but I am not able to locate the link)
I hope this can help in a small way.
Yea these are some of the good points , at the end, I think if a person is really committed , he will find out different ways !
I agree with many.It is true in general. But some exceptions will be there as agreed above. I want to share my experience. When I joined bank 21 years back, I felt’ I will be quitting the job at 45′(Don’t know the exact reason for my feeling). 6 years back I availed housing loan and purchased house with Rs 16 lakhs (including regt). Now I came to know that I can get about Rs 50 lakhs if I sell it now. If I want to start my own ‘work'(by the end of this year I will be crossing 45), I can close my housing loan and start my own work by disposing my house. I thought of resigning to implement my plans several times. It did not happen, because I was not serious, externally. But now, my house is giving me confidence that I can have my own money. Without Housing loan I could have missed the house. If you purchase house which can appreciate in future, your house with HL may not come in your way. If you want to start your work, you can extend the security of the house for the loan of your business/ unit also, without disposing it. My suggestion- If there is sufficient time to pursue your passion, if the value of house is within your financial (own+ loan) limits, If you feel that there is scope for appreciation, when you are not sure of the timing of your exit, don’t lose the opportunity of house when there is scope for housing loan.House gives you the feel of security, satisfies your family members and to you(Really). Eight years back I wrote one article in Eenadu news paper-Your house repays your housing loan. After 2 years of writing that article, I purchased my house and realised that my article is correct. Soon, I will be getting the rent required for my housing loan EMI. When you are calculated about your plans, housing loan will not come in your way( I have selected growing town for my house, I have seen rental value. I purchased when there was no boom)
Vanga
Thanks for sharing your experience .. While all the points you have mentioned are correct and true , The motive of the article was just to communicate that housing loan becomes a hurdle for many people to enter entrepreunership ! , do you agree on that concept or not ?
I agree with many.It is true in general… These are my starting lines. I agree. It is true. Housing loan becomes a hurdle for many people to enter entrepreunership. But if there is chance to get affordable house funded by Housing loan (not with own money.. I prefer to accumulate my money for my project) in the above said circumstances, I prefer to avail housing loan. I can use it for my project.
hi manish, my dad always says that i should look for a govt job, as it will make me secure, that was 15 yrs back, but i always wanted to do something of my own, today when i conduct financial awareness training in companies i tell this young guys to do what their parents used to do, they used to save and invest and before they retire they plan to buy a house, they dont have any stress , I just followed my dad way of saving and investing, today i have bought an house in cash deal. so i totally agree with you lot of my clients are talented, they can do wonders, but home loan emi comes in their way, we are planning to close the loan as soon as possiable.
Thanks for sharing your story and what your clients are facing !
Hi everyone I am interested in becoming a social entrepreneur and have some great ideas!!!! I am currently working with an MNC(analytics firm) but really would like to become a partner in a startup. I live in East Delhi,so if anyone is interested please respond me back 🙂
Namit
What kind of ideas would you like to work on ?
There this is beautiful quote: “First you own things, then the things own you”
Cheers
Really a great one !
Nice article Manish.. one need to assess his/her financial very well before getting into.. long ..committment of home loan, especialy if one is looking for real easate as an investment.
A decent 2 bhk in mumbai will cost approx 1 cr.. in normal situation an individual would require atleast 1.5 lakh consistent earning per month( accounting inflation ) to afford a home loan to fund the house.
India witnessed biggest rise in house prices in world since 2001…. will this continue … or a big correction is due…
Rahul
I am no one to predict it .. the same situation was there in US , but finally it busted .. but in India it can take time
india is an country where jobs or always less than demand.& its full of competition & race even for a under paying job.in this condition ,no body will get a proper job & if they got by chance job satisfaction,will remain b a question.
i will not say entrepreneurship but a self employment in any fild required very much.
we cant expect 120cr + population can get desirable job.in this condition we dont choose,we only accept.
& thats is the primary couse for unsatisfied employment.
Thanks for putting your views 🙂
Manish,
Good one, liked the real-life examples. I feel home loan not only kills the Entrepreneurs but also the salaried class.
Rakesh.. haha .. good way of putting it !
Nice Article Manish!!! I am a regular reader of your blogs on various financial subjects and every blogs has something to learn. This one also has the same learning.
We all know by heart, that any liabilities, be it home loan, car loan, personal loan kills your risk taking liabilities, but we still go ahead and take it. Be it peer pressuer, family pressure, high ambition we land up in taking this high end liabilities and then spent all our efforts, energy to pay this off. Same for me also: I have two home loans which holding me back to take any risk in my career part. But I have a plan to pay this off quickly and get myself free from this liability. Hope I will be able to stick on this plan and make myself free.
Just one thing: again this is part of another liabilities: many of my friends have taken up or plan to take up Holiday plan from Club Mahindra and they are asking me to take this up also. I know my bottom of my heart that this is not worth and again put me into a liability trap, but I am not able to analyse it properly to reach to a conclusion. It will be of great help if you can post a blog on this and provide some analysis.
Again Manish, you are doing a great job through this blog. Keep this up.
Thanks for putting your thoughts Abanindra … the thing is if you are really passionate and clear that you want to start something on your own , you will find a way .. be it clearing off the loan fast , or whatever !
Hi Manish ,
Sorry for the late reply.A bunch of them really, one is related to a website on which I have started working,others are primarily related to social infrastructure but require much more capital,so I guess the best way is to get a website.I hope that I can finish it soon and will obviously come here for guidance.
Cheers
Namit
Home Loan is an ASSET on the bank Books
Home Loan is LIABILITY on my Book.
No prizes for guessing who’s walking the plank
Good one !
As far as possible we should stay away from home loans. We should explore low cost Tier II and Tier III cities where we can buy home from our saving or at least take a minimum loan. It doesn’t make any sense to take, say 40lakhs of loan for a 225 sq foot room in Mumbai. It’s time rural part be considered and we expand from limited cities.
Not sure if that should be the final conclusion .. this article only wanted to highlight the issue enterpreneurs face with liabilities like home loan !
Home loan is like paying rent in advance for our children…we hardly enjoy the time, till we finish our EMI…home loan creates a internal owner of our house,who do not let us sleep till we finish the due EMI. 🙂
Tapesh
Thats an excellent definition of home loan I must say ! … great !
Instead why should the home loan not mke you just work harder generating additional active/passive income besides salary?
Working hard to pay EMIs….thats good..make a person work for 24 hours…leave all other things behind…where will be life ?
I am not meaning work 24 hours. Instead of thinking the home loan as something that bogs you down it does help to identify additional sources of income.
It can be writing about a hobby in a blog – like photography, gardening etc. If you have the passion for the hobby it will generate audience and cash flow.
How else did Jago Investor and such sites came into being? If JI was treated as a job then the passion would not have been there to grow this site. Blogging is not the only way – one can even think about taking weekend classes for 1-2 hours alone for students, say in a academy? This will barely be any money but will improve someone’s presentation skills and communication skills that can differentiate you at your work place and put you on a faster growth path.
What I am saying is the home loan can also encourage people to think making more money in other ways than being bogged down by the load?!
Good one .. totally agree !
Dear, I am not against any part time job option. But, just think from a common man prospective, how many can write good blogs, how many are good photographers, how many does realy have such superb creative skills. And, giving tutions is nothing but a contribution to the paralizing condition of our education system, which is spoon feeding the children. And, that is why we are not listed among the top 100 countires, doing good in research works. We are just becoming a cheap n good, white color labour for Western Countires. As per a quote i read somewhere, “Our life expend iin proportion to the risk we can take. I just want to tell people that, instead of getting trap in home loans, one should take a risk to develop his or her passion in a successful venture. If it would be successful, one would realy be in a good position and more confident about life.