Purchasing a house is one of the most important life goals for most individuals. In the past, people cut corners, scrounged, saved, sometimes borrowed from friends and families to be able to buy a home for them. Things changed with HDFC pioneering the concept of Home Loans. Today, with these conveniently available home loans, the number of people aspiring to move out of rental homes and buying homes of their own has grown exponentially.
But this decision to move to one’s own is a difficult one. While in traditional times, the lack of information forced people to make such decisions based on gut instinct and novice advice of family and friends, in today’s age of information too much data also makes the decision harder.
Before being tempted into paying EMIs over paying rent, there are some considerations one must evaluate than just the comparison between the rental amounts versus the mortgage amount. There are a number of other things to be looked into like
- Career and family plans,
- Additional financial liabilities,
- Financial stability,
- Further education,
- Frequent traveling,
- Other future considerations.
The final decision of buy versus rent must be financially prudent in order to avoid being bogged down by huge debt with the house becoming a bigger liability than an asset in the future.
With skyrocketing property prices though, for many the dream of owning even a small property in mumbai or Delhi is becoming a distant one. Thus, many have completely resigned to idea that they would be spending most or all of their lives living on rent.
The expert opinion on this matter is mixed too, and predominantly dependent on the real estate situation in each city, and in cases of larger cities like Delhi and Mumbai, even on the locality. A number of experts opine that it is more advisable to rent rather than buy a home in cities like Delhi, Bangalore and Mumbai. This opinion is mainly arrived at by considering factors like the average middle-class income of an individual in comparison to the rental costs and the EMIs for loans. On the other hand, cities like Pune, Hyderabad and Ahmedabad offer better opportunities to those looking to own their own homes.
On the basis of various internal and external factors, the decision of weather to buy a house or to continue living in a rented one varies for each individual. Some factors that one must consider before arriving at any kind of conclusion is;
- Height Growth In Property Rates Versus Rental Ones
In the last few years, for most major cities in the country, the annual increase in the property prices has been more than double the annual increase in rents.
- High Initial Costs of Buying
The initial down payment for a home followed by further expenditures like stamp duty, registration, brokerage etc. can dig a deep hole in most pockets.
- Inflation and Increase in Cost of Living
One must keep into account the increase in the future cost of living along with inflation when taking the decision to take on a financial burden. High inflation can lead to an adverse effect on cost of products and services used everyday, often leading to decrease in the disposable incomes available for borrowers.
- Uncertainty of Stay
In case one is not sure how long one must stay in a city, it is best advised to stay on rent. Buying a house can limit the ease of relocation.
- Time to buy
Although purchases at a young age are highly recommended, most experts advise investing in property only on achieving financial stability.