Should you look to rent or buy a home

<Owning a househas always been the single great Indian dream. But, rising property pricesare seeing the population gravitate towards rentingrather than buying a home. Meanwhile, the choice of whether to rent or buy a house is always tough for those who can afford to buy a home. So, is it better to rent or buy a house? Let’s do a deep dive into both options.

Benefits owning a house

  • First time home buyer benefits

That said, there are many benefits forfirst time home buyer too. They’re entitled to get income tax benefits of up to INR 5 lakhs (combined) under three sections, namely 80EEA, 24, and 80Cof the Income Tax Act.Section 24 pertains to a deduction on home loan interestpayment (up to INR 2 lakh). Furthermore, they can claim an extra deduction of INR 1.5 lakh (excluding the INR 2 lakh from above) under 80EEA on home loan interest. Finally, homeowners can get a benefit of up to INR 1.5 lakh for the loan principal repayment under Section 80C. Some states evengive a 1-2% benefit of stamp duty if a woman buys/owns the house.

  • Emotional satisfaction

Most middle-class Indians grow up with the notion that owning a house is a moment of pride and satisfaction and instills a sense of safety. Having a house also gives you the freedom to remodelit to your living requirements and preferences. And withever-increasing home values, paying EMIalso ends up increasing one’s proportional ownership in the home.

  • Long-term planning an investment

In the end, home ownership is all about legacy. People who will be living in the same area for a very long time are better off owning a house. Not only does it make more sense economically, but also, they can pass it on to future generations.If the area happens to be a developing one, especially in metros where space is at a premium, then property rates will only increase.

Benefits of Renting a house

  • Less financial burden

There’s little doubt that buying a home is a sureshot recipe for stress. The financial aspects of buying a house vs. renting one are very different. Most importantly, renting gives the impression of lesser responsibility and relieves one of the legal issues, property taxes, and EMIsthat come with buying a house.Also, one can claim tax benefits on HRA.

  • No impact on other goals

While buying and owning a house is an important goal, it’s not the only one, and EMI payouts tend to jeopardize other goals that one might have. Those who rent need to worry less about their children’s education, their own investments, retirement savings, etc.,as they don’t have EMIs hanging over their heads.One also doesn’t need to tap into their nest eggs kept for emergent situations.

Again, EMIs vs. rent amounts for the same house differ drastically. So, it might be possible to rent nearer to good schools or one’s office. But the same properties might not be within one’s budget when it comes to buying.

  • Flexibility and freedom

Renting offers far greater flexibility than buying/owning a house. People whose professional or personal lives don’t require them to stay in a place for a long time will benefit from renting as they can up and move anytime they want.

The Feasibility Aspect : Rent or buy a house

In the Indian context, homebuying is as emotional a decision as it’s a practical one. Today, mobility is an important factor in career growth. Hence, owning/renting a house becomes a rather deciding factor. In the end, it all boils down to the feasibility factor.

For instance, if the current rent on a 2BHK in a prime location in a metro city is INR 50,000, buying a house in the same location with the same EMI as the rent is next to impossible. Even if one compromises on the area, the average price of a 2BHK in a good enough location in a metro city is INR 1.5 crore. With a 20% down payment of INR 30 lakh and an INR 1.2 crore housing loan, the EMI amount is INR 1.03 lakh with an interest of 8%. Basically, that’s a 100% increase in terms of monthly spending in terms of rent-to-EMI alone. Even in a time period of 20 years, the outgo is close to Rs 2.4 crores, which means that the cost of the loan is higher than the loan itself!

So, the best solution is to live on rent for the first few years, thus buying one the time to sort finances and save money toward buying a house.

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