Renting vs Buying an Apartment in Ahmedabad. Which one is for you?

Assertive Wisteria Chinchilla
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Housing remains to be a sensitive topic in India, precisely because many people don’t have it. Should I buy or should I rent?  It remains to be the most asked question by all and stands to be one of the widely debated topics which involve deeper analysis of pros and cons to each.

Usually, people think of home buying as an emotional decision which is accompanied by the conventional wisdom claiming that buying is always better than renting. Homeownership has historically been an important source of household wealth creation wherein buying a real estate is like throwing an anchor in a particular place. It ensures greater stability in lives and safeguards against inflation. There is a sense of security and pride in home ownership Homebuyers can capitalize on the equity that has accumulated over the years wherein if the home value rises you tend to cash in higher value when to plan to sell the house. A fixed-rate mortgage will ensure you don’t worry about the shooting rent prices.

The homeowner has the liberty to mortgage property as well as generate additional income by rentals or from paying guests. As rightly said, don’t wait to buy a real estate, buy real estate and wait. The trick to arrive at a decision lies in comparing the annual expenses. Whenever we buy a house we have a mortgage to pay. A mortgage has two major components attached to it one of it being the interest and the other being the principal amount. The principal component forms the savings while the interest is purely an expense. Therefore expenses for buying a house include interest, maintenance, insurance, and property taxes.

The key factor deciding whether to buy or rent is the cost vis-à-vis the rental value. As a thumb rule, a tenant should not spend more than 25-30 % of household income on rent. As part of the rental value, one needs to pay heavy top-up charges like maintenance cost, electricity bills, and hefty one-time deposits. One of the most attractive advantages is that one gets greater flexibility to relocate. The people who are more risk averse are the ones who prefer renting. Rental prices don’t fluctuate as much as property prices do.

There are various qualitative factors that should be taken into consideration before arriving at any conclusion. Like determining what are your future plans? Do you have anything big planned in the near future which will require finances if yes then renting should be considered as it won’t block your financial resources? Similarly, if your job or work demands frequent changes in the place of stay then renting is preferred as it provides greater flexibility and accessibility.

Over the past few years, the property prices have spiked by 11.59 % while rents have increased by 9.79 %. It is the income of the family that helps in determining whether to buy a house, rent it or remain neutral that is staying in a rented apartment even though one can afford a house. The Buy vs. Rent Report 2019 tracks the real estate trends which state the average price of buying a house in Ahmedabad is 48 lakhs while the average rental value is 14,447.

Ahmedabad stands to be 3rd most affordable city to buy a house and 5th most affordable city to rent a house. Urgency-to-buy (UTB) ranking is another dominating factor in determining the decision.  The urgency to buy ratio basically helps in determining whether rental yields are in line with the property prices. 

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Article info

Published: 2020/05/07 - Updated: 2020/05/19
Total: 631 words

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