Should I buy property, or should I stay on rent?

Sep 30, 2019 | 3 weeks ago | Read Time: 3 minutes | By iKnowledge Team
Buying v/s Renting a House/Property

As per India Brand Equity Foundation [1], the real estate market is expected to get to US$180 billion by 2020. Thus, the sector continues to show robust growth. Property investments can be a part of your investment plans to fulfil aspirational goals or for need-based goals. But what you plan to do with the property can shed some light on where to invest money when thinking of buying a property or renting a house.

Understanding the goal of investing in your own property

If you buy a new house, you need to invest money and stay on track with your long-term financial plan. Your current income, potential income and financial planning for paying off debt will help you to determine a property and budget that suits your needs.

Home loans may offer attractive interest rates, but the loan amount doesn’t cover the entire value of the property. Do you have enough to pay the initial token amount and cover the remaining 10-20% which you need to pay from your own pocket? Later, investing money to purchase furniture and appliances for the house may be required. If you are investing in a property with your partner, then the load of loan repayment can be lessened. Also, when it comes to home loans, as per Section 24 of the Income Tax Act, 1961 you receive tax exemption on interest of the borrowed capital. In case you still need time to decide then investing in ULIPs, one of popular types of investments, can help you save money to buy a property in the future.

On the other hand, if you stay in a rented house, you have to stay as per the rental terms but enjoy more freedom to move around without worrying about loan repayments.These days jobs keep changing and people move to new cities for new opportunities. In India, having your own house is a matter of self-esteem but if your job profile requires relocation from time to time then buying a property won’t make sense unless you want to settle down in a specific place at a later stage.

Looking for investment returns

Buying a property and giving it on lease for a specific period to earn money is one of the ways Indians try to create a second income. Capital appreciation is another goal from property investments and real estate prices depend on market conditions. Innovative renting models such as Airbnb are also being explored by Indians to monetize their property. Giving a house on rent can be a hassle and a huge risk if the tenants create problems. In case, you do not find a tenant for renting out your property then you will end up paying the bank interest (if you take a property loan) and monthly maintenance charges of your property.

SEBI (Securities and Exchange Board of India) is the regulatory authority in India for managing the financial markets. For people who wish to invest in real estate for monetary gains, SEBI has rolled out several investment alternatives. Real Estate Investment Trusts (REITs) for investors who wish to benefit from the real estate market without investing in a physical asset. The Alternative Investment Funds (AIF) also lets you invest in real estate.

If you are a salaried employee, you can benefit from House Rent Allowance (HRA) for your rented space. Renting a space owned by someone else gives you the flexibility to move to residences closer to your office.

At the end of the day, property investment decision should be taken based on your investment appetite and your future goals. So, take your time and compare all the options to decide whether you are ready to buy a house or not.

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References:

[1] https://www.ibef.org/industry/real-estate-india.aspx


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