Is Renting A House In India Better Than Buying ?


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Price To Rent Ratio Comparison

This is a common terminology referred in US. The price to rent ratio is the price of property divided by the annual rent. Ideally, if this ratio comes below 15, then one can only prefer to buy rather than to rent any estate.

Analyzing Risk

Although after demonetization the property prices might decrease, but there is no surety about the same in the near future. Government policies can change and property prices may rise again after 5 years or so. On the other hand, rental payments as mentioned in most rent agreements can only increase to an amount of 10 per cent only, on an annual basis in India. This states that renting an estate will always be cheaper than buying.

Financial Condition Of Employed Personnel

Taking into account an ideal person with a monthly salary of 1 lakh per month. In such a case the bank would grant a home loan of 40 to 50 lakh for an estimated period of 20 years or more. In such cases:

Monthly Expenditure < (Salary- Equated monthly installment)

Furthermore, buying becomes more expensive at a certain amount, approximately 20 per cent of cost of house value would have to be paid in advance or upfront. For e.g. for a house worth 50 lakhs and amount of 10 lakh would have to be paid initially.

Additionally, buyers would need to keep a surplus amount besides EMI and household expenditure, which would cover your investment need and/or uncertain rise in interest rates.

On the other hand, there is no such clause while renting an apartment. Moreover, there is no interest rate charged on monthly rental.

Stability Of Income

People planning to opt for home loan for a minimum period of 20 years are not being granted loan amount easily. After a thorough check about the buyers stability, the banks grant them loan. Also, with the employment market being expanded with a number of people, salaries have become a concerned issue. Salary hikes to cover up household expenses and home loan EMI add up more to the pressure. If one is certain about their future salary raise, then only one should take home loan or plan to buy a property. In other cases, renting a property would be a much wiser choice.

Economic Cycles and Trends

In the ever evolving world, the economic cycles intend to change drastically every now and then. We have witnessed some drastic changes, such as crash in certain job sectors over the years and rise in other job sectors. With a lump sum amount of people being part of job sector, looking out for future prospects for change in economics and world scenario related to it becomes very important. Buying after considering all factors of economics makes it more difficult to buy than to rent. Renting an estate is a much easier choice considering all such factors.

Disposing At Ease

This is one of the most important factor, considering the amount of capital to be disposed off. Properties situated in places close to school, parks and mall are easier to sell than those located in merely remote areas. On the other hand, moving out from a rental apartment or estate is much convenient for those preferring to relocate every few months.

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