Rent vs Buy: Why buying a home makes more sense than renting in times of Covid-19

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June 9, 2020 2:42 PM

High property prices - especially in the metro cities in India - have been leading a large number of people to opt for renting rather than owning a home. However, this trend now seems to be changing fast, particularly after the spread of Coronavirus.

buy vs rent, rent vs buy home, rent vs buy calculator, millennials, homeownership, post-COVID-19, MMR, NCR, Bengaluru, home loan interest ratesANAROCK data indicates that the rental over five years for those renting homes within the city limits amounts to between 27% and 52% of the cost of a piece of property in the far suburbs of MMR, NCR and Bengaluru.

Owning a home is typically the dream of most people across the world. However, high property prices — especially in the metro cities in India — have been leading a large number of people to opt for renting rather than owning a home. But this trend now seems to be changing fast, particularly after the spread of Coronavirus.

A report by ANAROCK says that millennials are now increasingly interested in homeownership post-COVID-19. Therefore, it is worth calculating what works better for most in the current circumstances.

Commenting on this trend, Anuj Puri, Chairman, ANAROCK Property Consultants, says, “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. ANAROCK data indicates that the rental over five years for those renting homes within the city limits amounts to between 27% and 52% of the cost of a piece of property in the far suburbs of MMR, NCR and Bengaluru. This calculation covers the 5-year rental expense plus a yearly rental increase of 3.5%.”

For instance, the average monthly rental outgo in city-limit areas in the National Capital Region (NCR) is Rs 22,000. For 5 years, this equals close to Rs 13.77 lakh (including standard rental escalation for this period), which is about 37% of the total average cost of a property in the NCR’s peripheral areas.

Similarly, the average monthly rental outgo in city-limit areas in the Mumbai Metropolitan Region (MMR) is Rs 45,800. For 5 years, this equals close to Rs 28.66 lakh (including standard rental escalation for this period), which is about 52% of the total average cost of a property in MMR’s peripheral areas.

In Bengaluru also, the average monthly rental outgo in city-limit areas is Rs 18,500. For 5 years, this equals close to Rs 11.57 lakh (including standard rental escalation for this period), which is about 27% of the total average cost of a property in the peripheral areas.

“In short, this indicates that buying a home in the peripheries rather than renting one in the city centres makes a lot of sense,” says Puri.

Moreover, home loan interest rates — available between 7.15% and 7.8% — are currently at their lowest point and may decrease further on the back of the recent repo rate cuts by the RBI. This is another factor which works in favour of buying a home in current times.

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