What is better – Buying or Renting?

The economics of buying versus renting a home has been one of the most debatable topics in India. The costs associated with both are so varied in nature and weight that it becomes a complicated decision. Factors like capital rates, rental rates, mortgage eligibility and property taxes are significant ones in reaching the decision.

Here’s a sneak into the merits as well as demerits of buying and renting a property. A careful analysis of these in individual perspectives would help you to reach the right decision for yourself.

Merits of Buying a property Forms an asset Saves taxes for first time homebuyers Can be sold for profit Can lead to recurrent income in future Flexibility and freedom to alter and repair No rule over visitors, bachelors or pets	Demerits of Buying a property Heavy amount required to pay down payments Commits you to a regular outflow of income as EMI Costs a hefty sum for repairs every few years Makes you responsible for safety and repairs of building You are subject to hikes on home loan interest Makes you liable to paying Property Tax
Merits of Renting a property Does not involve a hefty down payment There is no home loan debt to be paid Flexibility of entering short term and long term leases Safety and repair of building is landlord’s responsibility Frees you from the liability of taxes	Demerits of Renting a property Temporary use – Doesn’t form an asset Commits you to a regular outflow of income as RENT No flexibility and freedom to alter and repair You are subject to annual rent hikes Visitors, bachelors or pets may not be allowed

 

At times, renting a home also allows you to stay as close to your preferred location (based on proximity to educational institutions or your workplace), where you might otherwise not be able to afford a home.  

Going by the merits and demerits listed for renting and buying a home in India, we can clearly see that the merits of one, closely become the demerits for another. But the one thing in common to both is that it commits you to a regular outflow of income, in the form of either Rent or EMI.

Therefore, the ideal way to help you decide whether or not it makes sense to stay on rent for a long term is if the rent amount is lower than paying EMIs for the same time period. Also, taking into account the amount of tax to be paid could help you reach the right decision.

 

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