Renting vs Buying a house: Pros and cons

Indian parents have to be the most vociferous when it comes to advocating the purchase of a house to kids. In the current scenario, however, it may not be a good idea for millennials to buy property as an investment. For self-occupation too, one must consider various factors before committing to a large EMI. It is better to rent when you start working instead of being tied down to a large EMI.

Instead of blindly following your parents’ advice, consider these pros and cons of renting and buying before taking a decision.

Also read: Why you shouldn’t always listen to your parents when it comes to financial planning & investing

Pros

  • Lower rent: Rent will be lower than home loan EMI. In NCR, you can rent a Rs 1 crore, 3-BHK house for Rs 15,000-25,000, but the EMI with 40% down payment @7% will be Rs 46,500 a month for 20 yrs .
  • Down payment: You don’t have to amass a large down payment amount early on in your career. For renting, you just need to provide a 2-3 month security deposit upfront.
  • No allied costs: You don’t have to worry about paying property tax, maintenance costs, repair bills, parking costs, etc.
  • Ease of job sifting: You don’t have to worry about maintaining or renting the house if you need to shift cities or countries for your job.
  • Flexibility of location: You can decide where to rent depending on proximity to workplace or school, reducing your transportation costs.
  • Building an asset: The amount you spend on rent can be used to pay the home loan EMI for building an asset for life.
  • Tax benefits: You can get tax deduction of up to Rs 2 lakh on interest paid for self-occupied home under Section 24, and Rs 1.5 lakh under Section 80C on principal amount. ..
    • Low loan rates, higher appreciation: Currently, home loan rates are low at 6-7%. Property prices are set to appreciate after the fall in the past few years.
    • No worry of shifting: You don’t have to constantly worry about moving houses if the landlord wants you to leave.
    • No landlord issues: You don’t have to suffer the landlord’s whims when it comes to maintaining the house or argue over who will pay for repairs, painting a ..
      • Emotional security: Having one’s own house provides peace and mental stability and the freedom to keep it as per one’s wish.

      Cons

      • Rent rise: Besides the annual rise of 8-10%, the landlord can increase the rent anytime or ask you to evict.
      • No tax benefits: You do not get any tax incentives for renting.
      • No freedom: You have no choice of altering, or making structural changes to the house without the approval of the landlord.
      • Outflow after retirement : You will have to continue to pay rent after you retire when you have no source of income.
      • Society limitations: You will have to abide by the rules of the society, which can include restriction on pets, limited vehicles, etc
      • More expensive: Buying a house is more costly than renting. besides the upfront cost of purchase, you have to pay charges for maintenance, property tax, renovation and repairs.
      • Illiquid asset: Real estate has much lower liquidity, which means that if you need the money, you cannot sell a house immediately.

      Depreciation: As has been seen in the past few years, there is no guarantee that property prices will always rise

admin@rushgh
I'm a song witter, story teller and likes to blog
%d bloggers like this: