Owning a house is definitely a dream of yours, but you have the common dilemma of renting vs. buying a Home in India. Here in this blog you’ll be clear out that either you should go for the Rent or buy Housing using the simple Calculation.
27 Oct 2021
Read the full blog to Explore buying vs renting a house in Indian because, in the Bigger cities, sky-rocketing property prices led you to opt for renting rather than buying. However, for people who can afford to buy a house, the tough choice between buying and renting is always a problem. There are different myths with both the options and some key factors we been summarized here.
1. Market conditions- In rapidly-rising real estate markets, owning makes more sense. But, when there is not much room for property price appreciation, renting would be a better option.
2. Your financial condition- An individual should evaluate the expenditure involved when it comes to Paying EMIs or monthly rent and expenses for the family.
Owning a house should certainly be your ultimate goal to lead a comfortable life. Nowadays, you must know With RERA (Real Estate Regulatory Authority), the risks of investing in under-construction properties have been greatly reduced.
If you are at a stage in life, where you can afford an outright purchase, or if you’ve saved the sufficient down payment, you can negotiate with a developer and go for a ready-to-move-in apartment.
If we buy a house, we pay an upfront down payment plus an interest on the loan amount, which is like rent (to the bank). And here are the main points that you can decide whether you should go for the Buying process or Renting.
Renting- When we rent a house, we pay a monthly rent - which is your only expense and you can invest your extra money in mutual funds, gold, stocks.
Flexibility- you have the Flexibility to move on where you want to stay.
Freedom- High degree of Freedom, more money you have, More freedom of choice you have with the rental.
If COVID like things-You can go home leaving the current rental.
So the right way to evaluate is - if I could invest that down payment plus interest amount (above the rent I pay), what would happen?
So the way to decide whether buying vs renting a house in Indian is to compare-
Rent: How much am I paying as rent and how much do I earn by investing the down payment amount and the additional monthly interest that I pay to the bank
Buy: Ask yourself- How much am you would paying as cost of the house and how much do you getting if you sell the house later on.
It is essential for a home buyer to determine the amount of money that would be necessary, to be financially ready to buy a home. The following points will help you decide either you are financially free to buy a house-
Financial experts recommend that more than 30% of one’s income should go towards servicing the EMIs. And also there is a maximum limit an individual will be eligible for on the income level that is released by the bank with a certain loan amount.
Here is the best rule for calculating either you should opt for buying vs renting a house in India. It’s a very simple rule everyone can follow this. Decide to Rent or Buy a house seeing the financial aspect can be answered with the simplified 4% rule.
1. Annual rate < 4 % Home Vale –Rent is good
2. Annual Rate > 4 % Home Value- Buy the Property
Let’s understand taking an Example-
Let the Price in Renting a 2-BHK be 15,000 Rupees, and the actual value of the Home is 40 lakhs
So the calculation for One year (12 X 15,000=1.8 Lakhs
Again, (1.8/40) X 100= 4.5 % which is More than 4 % of the Home value so you should buy that property.
Very simple and calculative method to know either you should be going to buy a house or rent a house. Rental yield- is the annual rate of rental return that an investor can earn out of his investment in a property.
|Rental Yield in different cities in India|
|Delhi NCR||2.84 %|
Using the Following method, you could know either you should buy a house or take on rent in the bigger cities. If the Property value is 100 Rupees, and with the Indian scenarios, the Rental yield is between 1-4% meaning the Investor will make 1-4 Rupees yearly on rent.
Total House Value= 1.8 Crore Let’s say you are paying the rent of 25 Thousand.
Annual rental income = monthly rent (25) x 12 = 3.0 Lakhs
Rental yield = (annual rental income/ property value) x 100
= (3.0/180) X 100 = 1.66 %. If you’re a tenant, and if the house and the Rent grow at the same rate- (8-10 %), for 80-90 Years, you can live at this House to pay the House Value.
Sometimes you think that…you’re paying rent and think why not buy a house on EMIs. Every month you’re giving to renter…why not own a House.
So if your income is not stable don’t know when you leave this city, definitely go with the Rent.
Not buy the house to attach with the Loan for Years (20-30 Years) and even fear to not skip the Current Job. Don’t sell the Jewellery or whatever saving you have, and put into for the Down payment for the House.
Conversely, if your Finance is strong, and care for the Generation to live in your Dream House, Definitely Buy a House… a good ever idea.
and find clear-cut your Decision of buying vs renting a house in India Don't know you all financial balance.
Want to Know the Practical Approach of the Civil Engineering- CLICK HERE!
To Clear the Billing Engineer Interview- Billing Engineer Interview question and Answers
If you are Fresher Civil Engineer, Read this-Fresher Civil Engineering Jobs & Salary | Explore inside