There are many compelling reasons why purchasing a home is a better long-term financial decision. A home is much more than just four walls and a roof. It kindles a range of emotions and thoughts in us. Indian parents have to be the most vociferous when it comes to advocating the purchase of a house for kids.
Instead of blindly following your parents’ advice, consider the pros and cons of renting and buying before making a decision. below are 7 Reasons Why Owning a Home in India is Better Than Renting.
Buying vs Renting a House in India: A Comparison
No Landlord Hassles:
- Ownership provides control, avoiding reliance on landlords for repairs and maintenance.
Emotional Security:
- Homeownership offers a dedicated and emotionally satisfying space for the family.
No Uncertainty:
- Eliminates concerns about lease termination or annual rent agreement renewals.
No Compromise:
- Allows choice of a property meeting expectations without compromising on essential factors.
Easy Financing Options:
- Access to flexible financing options makes homeownership achievable, even at a younger age.
Tax Benefits on Home Loan:
- Repaying a home loan brings attractive tax breaks on principal and interest payments.
Building Your Own Asset:
- Home loan EMI payments contribute to building equity in the property over time.
Home as an Investment:
- Provides a sense of belonging and permanency, with property prices generally appreciating.
Conforming to Social Norms:
- Buying a home is seen as an accomplishment, enhancing social status and wealth.
6 Benefits of Investing in a House Rather than Paying Rent
The Emotional Parameter- Buying a house offers emotional satisfaction, especially for those looking to create a legacy for future generations.
- Factors to Consider When Buying a House
Down Payment:
- The upfront payment provides partial ownership of the house.
Interest on Loan:
- Cost of taking a loan, paid as EMIs to the bank.
Maintenance Cost:
- Monthly expenses for property upkeep and maintenance.
- Factors to Consider While Renting a House
- Factors to Consider While Renting a House
Rent:
- Monthly payment to the landlord, often with an upfront deposit.
- Monthly expenses for keeping the house in good condition.
- Rental Yield
Rental yield in India typically ranges between 2% and 3%.
Parameter Value Property Value ₹5 crore Monthly Rent ₹65,000 Annual Rent ₹7.8 lakhs Rental Yield 1.56%
Risks associated with buying a home:
1. Financial Debt:
- Long-term financial commitment with a significant portion of income going into EMIs.
- Severe repercussions for failing to make EMI payments, impacting credit score and future purchase options.
- Responsibility for constantly upgrading the property to maintain value.
- Is It Cheaper to Rent or Buy? Crunching the Numbers
| Scenario | Value |
|---|---|
| Buying a House (Value) | ₹60 lakh |
| Renting a House | ₹20,000 per month |
- According to the comparison, renting is currently a better option, with a net benefit of ₹1.73 crore, compared to ₹1.61 crore for buying. The decision depends on location, rates, and market conditions.
Conclusion
- While the current status favors renting, market dynamics and property value fluctuations can influence the decision to buy. It's crucial to consider individual circumstances, location, and market conditions.