Traditional Indian wisdom has for decades dictated that it is better to buy property rather than renting it. Renting during these times was for temporary purposes or at the maximum a few years till you could buy a property or get a loan.
This was backed up with the fact that, buying a property was far easier than renting a property. It was even harder cause people didn’t have any easy way to communicate the need or the availability of the property. They were afraid to give their property on rent cause of the erstwhile legal framework that was tilted in the favor of the tenants.
However with the advent of legal amendments, balanced laws & Modern technology, Renting has a new face and there are some genuine reason that people would want to rent rather than buy a property like –
- Frequently shifting cities to explore career opportunities.
- Sensitive to surroundings and amenities (Maybe you want to relocate to areas with a particular school or amenities)
- Financial arbitrage (Rent in Mumbai is much lower than the buying costs. Eg – Rent is 33,000 while cost is 1.9crores for a 1000sqft place.)
- Flexibility – Some people like the advantage of having the flexibility of being able to pack their bags and move areas ro cities to where ever its more convenient for them. Especially to reduce commuting times).
- Not eligible for loans.
What more is that with Anulom and others, providing innovative solutions to find and rent property hassle-free, renting has never been this easier in the history.
- In some cases, Buying a property might not be preferred if –
- You don’t want to be tied to one place
- You don’t have the cash or don’t want to be tied down by a 10-20-30yr loan.
- You don’t want the hassle of buying a property, paying taxes and maintaining it over decades with significant expenses.
- You want to have the flexibility of packing your bags and shifting cities.
There are a lot of reasons why one would rent, but does it make financial sense?
You can find out with this calculator here – > http://www.livemint.com/Object/ipfQL8zoXnj5AmuZCEJGsL/rentvsbuy.html
Buying a house
Buying a house is a smart choice. But, before you buy one, here are a few factors that you must consider.
- Got cash to spare? – Houses and apartments can be expensive and if you don’t have the means to pay for it outright, you’re probably going to have to opt for a Home Loan. But here’s the thing with Home Loans; lending institutions usually loan you around 80-90% of the cost of the property, depending on the lender. The remaining 10-20% must be put up by you, the buyer. So, make sure that you have enough cash to make the down payment.
- Debt vs income Ratio – Another factor is your debt-to-income ratio. This is the number of loans you have taken in proportion to your income. If you’re taking a loan, most lenders look at this ratio to make sure that you won’t default on your loan payments and other debts. Ideally, your debt-to-income ratio should be below 50%.
- Other Expenses – When buying a house there are other expenses to think about such as property tax, insurance, annual repairs, maintenance and other costs. Do you have sufficient means to take care of these?
- Mobility – When you buy a house, remember that you give up on mobility. This could be an issue if you shift jobs and your new office is at a distant location from where you live or is in another city. Of course, there are always ways to deal with this but it is something to consider when deciding whether to rent or buy.
- Area Analysis – Check the real estate prices in the location where you wish to purchase the property and the future potential of the property.
Here are some questions you should ask yourself before deciding to buy a house:
- What is my financial condition like and can I afford to purchase property in my current situation? If so, how much down payment can I make from my savings?
- If I opt for a Home Loan, will I have sufficient money to live on after I make my monthly EMI payments?
- How are my investments positioned in relation to other critical goals?
- What are the current property trends in the city where I want to buy? Is there a location advantage? Will real estate prices move up or down in this city?
- Am I eligible to take a Home Loan? If yes, what would be the loan amount?
- What should be the value of the property if I choose to buy one? Will the EMI be lower than the amount I would pay as rent?
- If I choose to continue staying on rent even after I purchase a property, will I get sufficient rental income from the property to make it worth my while?
- What is my future earning potential and how will my finances change, post this decision of purchasing a house?
Once you answer these questions, you’ll have a clearer idea of whether or not it makes sense for you to buy a house.
Renting a House
If you wish to live in a rented property, here are a few things you should take into account:
- The security deposit to be paid to the house owner.
- The monthly rent you pay.
- The shifting and brokerage charges you will have to incur every time you shift.
- The annual increase in rent.
If you are a salaried employee, you will receive a House Rent Allowance benefit when you pay rent under the Income Tax Act.
As you can see, it’s a tough decision, and your life literally depends on it. Ironically, people often postpone making a decision for this very reason. If you are someone who is thinking about renting or Buying, you should make a decision today. Consider the above points and decide if you want to rent or buy, or maybe rent for a few years, pursue career opportunities in different cities and then settle and buy property.
In case you do decide to rent the property, remember we at Anulom provide the easiest way to rent property. Find your favorite place and give us a call, we will have the rent agreement ready and registered in no time, so that you can quickly move into your favorite place!