The middle class always dreamt of owning a house till the late 1980s. People saved money for years to have that one moment of ownership. A home without rent was considered the final destination, whose journey was followed by years of struggle and scrimping. It was like attaining mental peace or getting reincarnated; where one can sit and relax on his/her rolling chair, and feel proud about life’s achievement. People would mortgage/sell jewelries or ask financially stable relatives/friends to lend money, to realize the sense of ownership. It was an innovative hack for security in old age. It included long term planning for a safe future.
However, the whole real estate game changed with the influx of home load companies. Now, arranging the down-payment became easy, but repaying became a regular affair, it became mandatory to pay a fix amount every month till your hair turns grey and so to say, solidly grey. Now, owning a house didn’t remain a distant reality but was just a few calls and signatures away. This gave birth to the buy vs. rent debate in India. One has to consider a plethora of parameters before taking this life changing decision.
Now real-estate agencies and banks are aggressively persuading the youth to take risks and invest in real estate. With the rents increasing and landlords becoming wealthier every year, they claim that it makes sense to pay high prices and become proud owners of beautiful homes. Now the question arises that, on what basis one can decide? The main parameters being – increase in rent, property tax, municipal tax, water tax, capital investment, rate of return, etc. And most of the times, staying on rent makes more sense for the middle class, unless one is sure that the long term return would be exponentially high. The other option is to keep on saving as much as possible, and then in a few years after gaining financial stability, one can invest a large amount on down payment, thereby reducing the EMIs and becoming bank’s preferred customer(considering the inflation wouldn’t be too high).
Buyer of a house has to take care of a lot of factors –
- Current affordability of the down payment
- Eligibility for taking home loans
- Financial condition after paying monthly EMIs
- Monthly EMI </=/ > Rent
- Current property trends and future real estate analysis
- Investment requirements in other sectors
- Whether to continue living on rent even after buying a property
- Chance of increase in income – promotion/incentives/extra work
- Possibility of staying in the same house for more than 10 years
- Cost of house maintenance – leaking ceiling, infestation, proper electricity, flow etc.
Salaried employees often get House Rent Allowance under the Income Tax Act, so that way living on rent becomes affordable. However, it is good to have a house as an asset and it adds to your societal portfolio, but one must consider the consequences before getting swept away by the benefits. And if any of the above factors do not fall in the desired category then one must not get into the hassle of buying a property such for the sense of ownership.