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The question whether one should buy or rent has been a difficult one for the common man since time immemorial. Many start saving for this aspirational investment ever since they get their first paycheck. Most people find themselves in a dilemma to choose between buying and renting. Overall the situation may also differ from person to person to arrive at a decision. For example if a person is staying in Bangalore only because of his work commitments, it does not make much sense for him to invest in a property in Bangalore if he does not plan to stay in the city for long. In such situations, renting a premise would turn out to be a better option and more financially viable.

At the same time the need to own a home stems from a sort of ownership pride, a feeling to have something we can call our own, the need for stability, to have a permanent address and a roof over our head. However, skyrocketing property prices may have wrecked and ruined that dream for many. And, while some have put off the plan to buy a house, others have simply resigned to the idea of continuing living on rent, which is relatively within their means.

Points To Consider Whether To Rent Or Buy

property price

Image Source: Economic Times

The decision to own your first home is generally a problematic one especially since we always seem to be waiting for the right time and moment. Thus no wonder many of us keep delaying the decision to own a home repeatedly. Some of the key points and factors that may help you decide whether to go for a rented house or to invest in buying a house are as follows-

RENT BUY
Investment There is much lesser investment when renting. Apart from the monthly rent and security deposit, no huge sums of investment. Huge sums of money need to be invested. A lot of financial planning is involved while buying a property
Change in property prices Change in property prices have minimum effect on rentals. Change in property prices is an important factor to consider when investing in property. It offers a security and equity.
Interiors Interiors cannot be changed and one has to make adjust with whatever interiors are available although one can add additional pieces of furniture, wardrobe according to one’s taste and suitability One can make necessary additions to the interiors to suit one’s requirements.
Return on property There is no return on the amounts spent as rentals. Only the security amount is refundable. There is good returns on property investment in the form of capital appreciation or if the property is rented in the form of rental income.
Affordability A tenant can rent in any place he wishes to irrespective of the property price depending upon other factors like workplace, schools and other social infrastructure. A homebuyer may not be able to afford to buy in a place of his liking or that which is close to his workplace, kid’s school etc.
Maintenance The rented premises has to be maintained in a timely and proper manner to prevent any degradation in property. Unless urgent, maintenance can be undertaken at one’s leisure.
Repair costs Repair costs are to be borne by the owner. Though the tenant may pay for the repairs and later on be compensated by the owner by a deduction in rent or by any other means. Repair costs have to paid by the owner of the premises.
Renovation Renovation can be carried out only when the owner of the wishes to. Painting, whitewashing etc are to done at the wishes of the owner. Renovation can be carried out by the owner to suit his style and need anytime he wishes taking into account his finances and other considerations.
Restriction Certain restrictions may be imposed like not cooking certain type of foods, not allowing pets using limited water supply etc. A tenant is bound by the rent agreement. No restrictions as it is for self use unless the resident association or society of which the owner maybe a part imposes certain restrictions. Not bound by any agreement.
Mobility A tenant can leave a property after fulfilling the notice period, which is usually one month An owner is likely to be dependent on selling their home before being able to buy a new one, and therefore it might take longer to be able to move homes once the decision has been made to do so.
Additional cost A tenant does not have any additional burden apart from the rent, utility bills and the occasional minor maintenance, which will also be reimbursed. A homeowner apart from the cost of buying a home, may have the additional burden of home loans, taxes, maintenance etc.
Moving out Much more easier for a tenant. Has to serve a notice and collect his deposit after necessary deductions are made if any. A home buyer may find it difficult to move out to another premise unless he sells off the existing premise.
Savings Tenant may have additional money which they can use to invest elsewhere, whether it is saving towards buying a house or investing in the stock market, and need not worry about putting additional funds into a home loan. Can save money in the long term due to possible tax deductions related to income-generating properties

    Parameters To Consider While Calculating Whether To Rent Or Buy

Price

Image Source: Economic Times

Buy vs Rent

Image Source: Economic Times

Some of the parameters that will help you calculate as to what is more beneficial-rent or buy in the long run are as follows-

  1. Property detailsThis will include the following points
  • Property price
  • Status of property- Ready to move in or Under construction
  • Years to possession (if under construction)
  • Expected property appreciation (per year)
  • Current rent
  • Monthly gross salary
  1.  Loan details     
  • Whether a loan is required or not. If yes
  • Down payment amount
  • Loan amount
  • Loan tenure
  • Interest rate
  1. Tax details
  • 80C investments being made per year
  • Tax slab(depending upon income)

On the basis of the above information, one can calculate which is more beneficial in the long run-to buy or to rent.

Conclusion

Buying or renting remains an eternal question that one faces at some point in life. However one has to look at the long term benefits and advantages to arrive at the answer to this question. Meticulous financial planning coupled with better home loan rates can help you enter the real estate sector as a buyer and own your dream property. The coming days seem to be a good time for property investment and to get good returns as well. With the housing regulator RERA in place, structural changes have taken place. The real estate market definitely looks inviting for any potential home buyer as compared to a few year back. Things are sprucing up in the real estate market and one can confidently now is certainly the best time to go ahead and book that dream house you always wished for.

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