To buy or rent your next house?

To buy or rent, has been the most debated topic amongst ambitious home buyers. In earlier times, it was a standard middle class dream to cough up enough savings to buy a home. With time, however, given the easy availability of home loans, the number of young people who can afford a home has increased exponentially. Yet, soaring real estate prices has kept home buying out of reach a significant part of the population.

There’s also a significant shift in the way the young generation perceives real estate today. Couples with no children and singles would rather opt for rental accommodations in prime locations as it is far more cost-effective rather than buying one on the outskirts of the city.

There’s an old adage, why buy when you can rent? But for home buyers, it’s a question with not a single but several right, and wrong answers.

No matter the scenario, home buying will continue to be the most precious investment a person makes in his lifetime. A life-changing decision such as buying a home, then demands close consideration of several factors like, disposable income, areas best-suited for investment, home loans, the development of the desired locality, scope for price appreciation, and a comparative study of these options. It is not always about choosing the cheaper alternative, the decision hinges on one’s priorities, far-sightedness and life goals.

Buying a home early on is always a preferred option. Not only does it provide greater privacy and security for your family, it is also a liquid investment whose value increases over time. But, prior to that one must first evaluate their long-term financial health and ensure there is sufficient capital to make the down payment, pay the EMIs and still have enough money to for other necessities like education, medical emergencies, etc.

The total principal outstanding must not exceed 50% of your total assets at any point in time and the EMI should not account more than 30% of your net monthly income. One must also account for insurance, stamp duty, registration & maintenance costs apart from the price and deposit paid to the developer and the home loan provider. These costs can cause a significant dent to your finances if they are not accounted for in the beginning itself. It is also extremely crucial to opt only for reputed developers if investing in an under-construction property.

It is common knowledge that homes in prime locations across Tier I cities are expensive. Rather than being coerced into taking a huge home loan and paying hefty EMIs for the next few decades, a lot of people today prefer to opt for a rental accommodation.

For those not sure about settling in a city, renting should be the preferred option given the lower costs involved. It also provides better mobility wherein one can move seamlessly to a new destination without any worry.

Although buying a property is the best option out there, it is difficult to act on the thought, as the options of moving into an own house has its own set of demands, while renting a property is hassle-free.

While rental accommodation is a familiar concept, it is essential for a tenant to be well aware of the rules and regulations of renting a home and the laws that precede it. Tenants must be aware of the tenure, consistency of the rent during this period and clarity on add-on costs like maintenance charges and other applicable society fees.

Clearly, both renting and buying have their pros and cons. But in the last decade, property prices have gone up significantly, while rentals in most cities have continued to remain within the reach of the masses. The rise in income has not kept pace with the rising inflation, thereby increasing pressure on those servicing monthly instalments for their homes.

For most home seekers, the decision to buy or rent is either based on their understanding of the market or on their financial ability to make a purchase. But, regardless of the choice, one must tread the path with caution and have a balanced approach towards real estate.

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