The question of rent vs buy has befuddled the brain of many a millennial who frantically searches for a decent home to eke out a beautiful lifestyle amid the vast throngs of the city. With a lot of upcoming projects in Mumbai that hope to fulfil the demands of many potential home buyers – this question has now become even more crucial for many. So, read ahead as we make things a whole lot easier by giving you all the pros and cons of each side to help solve this adulting problem for you!Â
Renting
Pros
- Renting a house saves your earnings as you don’t have to worry about paying large down payments, monthly EMIs, and property taxes.
- Since living on rent means that the landlord takes care of the maintenance and repairs of the house, this saves you from the burden of expenses such as fixing wall leakages or paying the society maintenance. Thus, one can save significant amounts that can be effectively used in other investment methods such as mutual funds.
- For example, if you’re paying a rent of 20,000 to 25,000 for a property worth 1 crore – the rest can be saved from your earnings as there are no maintenance costs to pay. This lump sum (say 5 lakhs per year) can be effectively invested in equity mutual funds that may possibly amass a wealth of 2.6 to 3 crores (with an annualized return of 12%) at the end of 10 years.
- Renting also allows you the flexibility to move elsewhere when your lease ends. This is a great option for many youngsters who often move to different cities while changing jobs and building a successful career.
Cons
- As rental payments tend to increase at least by 2.5 to 3% per annum (in Mumbai), your savings may eventually see a depreciation down the years.
- Renting also comes with various restrictions by the landlord. For example, a common restriction is that you may not make any changes to the structure and interiors of the house. On the other hand, owning your own home allows you to build a lifestyle freely, just as you choose.
Buying
Pros
- Owning your own home, where you can unwind freely at the end of the day is an achievement in itself! You can choose who you want to live with, build a family, provide well for your children, or have a secure home for ageing parents.
- It is an investment that will only grow your wealth in the long run as the property rates in major cities usually face an exponential rise in price appreciation. 10 to 20 years down the line – the price of your property may possibly rise to amounts that you may have never dreamt of! So yes, investing in that 2 bhk flat in Thane you’re on the fence about, might just give you immense financial fruits in the long run.
- The maintenance costs and loan repayments one painstakingly pays each month turn out to be a solid investment over time, to build one’s dream home. This is why the overall profits of homeownership tend to be higher than renting in the long run.
- Taking loans for owning a property also means that one enjoys significant tax deductions!
Cons
- If you’ve taken a loan to purchase your home, monthly instalments often tend to eat up more than half of one’s salary. So one may have to be economically cautious or live frugally for some years.
- There are a lot of additional expenses one needs to be ready for while owning a home. As a homeowner, you may have to account well for sudden repairs such as fixing the plumbing, leakages, repainting the home etc. Besides these, there are additional charges such as monthly society maintenance, property taxes, and more to think about.
- Owning a property is also considered an illiquid asset which means that it may get difficult to sell when the real estate market is down. While selling, you may also need to think about various transaction costs involved in the process.
- If you have to move away for work, changing houses is not immediately possible. It may also prove to be time-consuming, and even expensive in certain circumstances.
So, what should you do? While some may think that renting equals “throwing your money away†and home-owning “always increases the price of your asset†– it is not necessarily that simple.
We suggest you consider your lifestyle factors and present requirements before making a decision. For example, renting may be the only and the best option for a 25 year old who has moved to another city to work. On the other hand, home buying may be the right choice for a 35 to 40 year old with a family and children to take care of.
If you’re someone who is constantly required to move around a lot for work, renting suits you better than buying a home. Whereas, if one is looking for stability for their family and plans to live in the city for years to come – buying a home is a sound decision for the long run.
Here’s a calculator by Magic bricks that may further help you with this decision.
At Ashwin Sheth Group, we ensure that you get the needed information to make informed decisions about buying a home. Whether you choose to rent or buy, we hope you find a nice neighborhood and the right locality to build a life in the city. If you decide to purchase, opt for reputed developers who give you spacious flats, lavish amenities, and crucial facilities needed for you and your family.
