Updated January 19th, 2024 at 10:40 IST
Housing headache: Experts weigh in on the renting vs. buying dilemma
NoBroker's annual report shows that a smaller difference between rents and home loan EMIs has led 65% of people in India to consider buying property in 2024.
Buying a home vs. renting it: Are you confused about which path to take? Well, it's time to rethink renting, according to experts. The uncertainties have prompted a fresh evaluation of the pros and cons associated with homeownership and renting.
"Don't delay buying a home, in real estate there's no such thing as being too early. Real estate is a long-term investment that tends to appreciate over time, providing a standard appreciation year on year. Waiting may only result in higher costs, making the case for those contemplating home ownership to make the move sooner rather than later," said LC Mittal, Director, Motia Group.
"The younger generation, accustomed to finding convenience in renting rather than owning commodities, faced challenges during the pandemic. The widespread practice of renting, from houses to furniture, raised safety concerns across various aspects of daily life," said Bharat Aggarwal Vice President Naredco National.
Millennials flock to own homes
The aftermath of the COVID-19 pandemic has triggered a shift in the housing preferences of millennials in the country. Recent findings from Anarock, coupled with insights from industry experts and a report by NoBroker, unveil a compelling narrative of millennials increasingly opting for homeownership over renting. "This transformation reflects a growing inclination towards the security and investment potential offered by owning a home," said Mittal.
Anuj Puri, Chairman, Anarock highlights this evolving trend, saying, "There are many sub-arguments involved in the rent vs. buy debate, but we know that millennials are now beginning to lean more decisively towards owning rather than renting the homes they live in."
NoBroker's annual report reinforces this trend, revealing that a narrowing gap between rents and home loan EMIs has motivated 65 per cent of individuals across India to express their readiness to buy property in 2024.
Motivations for buying include 35 per cent seeking security, 30 per cent responding to rising rents, 26 per cent attracted by affordability, 5 per cent capitalising on pandemic-induced savings, and 4 per cent preparing for impending marriage.
"Millennials, driven by a desire for both security and financial prudence, are poised to become the driving force behind a surge in homeownership.
In the National Capital Region (NCR), the average monthly rental cost in city-limit areas is Rs 22,000, contributing to a 5-year rental expense of about Rs 13.77 lakh, accounting for 37 per cent of the total average property cost in NCR's peripheral areas. Moving to the Mumbai Metropolitan Region (MMR), the monthly rental outgo in city-limit areas is significantly higher at Rs 45,800, resulting in a 5-year rental expense of nearly Rs 28.66 lakh, comprising 52 per cent of the total average property cost in MMR's peripheral areas.
Meanwhile, in Bengaluru, the average monthly rental cost in city-limit areas stands at Rs 18,500, with a 5-year rental expense of approximately Rs 11.57 lakh, making up 27 per cent of the total average property cost in Bengaluru's peripheral areas, according to data compiled by INDmoney.
Home choices: Heart and wallet
Experts say, in the debate of buying versus renting a house, individuals grapple with both emotional and financial considerations. The decision-making process involves evaluating various factors that impact one's sense of achievement, stability, and financial freedom.
Owning a property is perceived as a symbol of personal success, providing stability and security with no eviction concerns. It becomes a legacy to pass down through generations, aligning with societal pressures to 'settle down.' However, this decision brings the pressure to conform, and the fear of missing out (FOMO) when peers acquire homes can influence choices.
Psychologists affirm that a shift towards preferring homeownership is backed by research. "Studies highlight how the residential environment affects behavior in both children and adults. Living in one's own home is seen to positively contribute to personal and familial growth," said Jhilik Bhattacharya psychologist.
On the other hand, renting offers flexibility and satisfaction derived from mobility and the absence of long-term commitment. While it doesn't build assets, it creates memories without the constraints of property ownership. Renting acts as a respite from societal expectations, allowing decisions based on current needs and reducing the pressure to 'settle down.'
The financial aspects of buying a house involve budgeting for down payments, registration fees, and associated expenses. Location and size play crucial roles, with prime locations or larger homes incurring higher costs. Additional specifications like amenities can add to the financial burden. Builder credibility becomes a critical consideration for buyers, ensuring quality and preventing fraud.
Budgeting for renting includes costs like security deposits, advance rent, and property agent fees, with monthly rent as a recurrent expenditure. While renting provides short-term budget flexibility, it lacks the long-term investment potential associated with property ownership.
Published January 15th, 2024 at 13:13 IST