When deciding between renting or buying a house in India, the decision isn’t always straightforward. It depends on factors such as interest rates, inflation, lifestyle, and long-term or short-term goals. Whether you plan to take out a home loan or pay upfront, the choice requires careful consideration. Let’s explore both options to help you figure out which might be the best for you.
Renting a Home
Renting is often the go-to option, especially if you are new to a city. It’s hassle-free and doesn’t require a big financial commitment. Renting allows flexibility to move from one place to another without being tied down. However, it’s a good option mainly for short-term stays. If you plan to settle down long-term, renting may not be the most suitable choice.
A common myth about renting is that it’s a waste of money, but that’s not true. Renting provides you with a place to live, which is a key need. While you’re not building equity or investment value, it offers the ease of budgeting because your monthly rent is predictable. However, costs like utilities and maintenance may add up and are sometimes unpredictable.
One downside of renting is the possibility of sudden rent increases. This uncertainty can make it harder to plan for the future, and shifting homes is not always an easy process. In some cases, residential areas have rent ceilings, which may limit how much a landlord can raise the rent.
Factors to Consider While Renting a House:
• Rent: The amount you pay to live in the house, often requiring a security deposit (typically 1 to 12 months of rent).
• Quality of Life: Most of the gated communities and stand-alone buildings have parking-related issues where homeowners are given first priority for car parking whereas tenants are advised to park their cars outside the society.
• Maintenance Costs: Regular expenses such as security charges, parking, or other service-related costs that maintain your quality of living.
• Overall Cost of Living is higher: Renting a home in Mumbai can be costly, especially when compared to buying as per a recent report by CREDAI. High real estate premiums are a significant factor, placing pressure on developers, home buyers and tenants. Premium rates in Mumbai far exceed those in other major cities; approval costs for developers in Mumbai are reportedly 25 times higher than in Delhi-NCR and 47 times higher than in Bengaluru. This drives up housing prices, making affordable projects harder to bring to market. For mid-level professionals in Mumbai, the situation is challenging. Those earning an average of ₹15.07 lakh annually often allocate nearly half their income—about ₹7.5 lakh—just for renting a 2 BHK apartment. This makes it crucial to weigh renting costs against the benefits of homeownership, especially if long-term affordability is a goal.
Owning a Home
Owning a home is a big milestone for anyone. It brings the security of having your own space, without needing to pay rent each month. However, buying a house is a large financial commitment, and many people rely on home loans to make it happen.
The major benefit of homeownership is that it builds equity—your investment grows over time. Homeowners can also enjoy tax benefits, especially if they’ve taken a home loan. For example, under India’s tax laws, you can claim deductions on the interest paid on home loans, helping reduce your overall tax burden.
Another key aspect of homeownership is that it allows you to make changes to your property as you wish. From upgrading interiors to increasing the value of your home over time, it gives you full control over how your living space looks and functions. However, maintenance and repair costs can add up and require both time and money to manage.
Key Differences Between Renting and Owning:
• Building Equity: Renting provides you with a place to live, but you’re not building equity like you would if you were paying off a mortgage.
• Tax Benefits: Homeowners enjoy tax breaks, including deductions for home loan interest and on rental income if you rent out the property.
• Repairs and Maintenance: Owning a home means you’re responsible for all upkeep and repairs, which can be costly.
• Time Commitment: Homeownership requires a greater time commitment for maintenance and renovations.
Tax Benefits for Homeowners
Indian tax laws offer several advantages for property owners:
• Home Loan Interest Deduction: You can claim tax deductions up to ₹2 lakhs under Section 24 of the Income Tax Act for interest paid on home loans for self-occupied properties.
• Rental Income Deduction: If you rent out your property, you can claim a deduction on property-related expenses.
• Capital Gains Tax: Profits made from selling a home are subject to capital gains tax, but if you reinvest the proceeds in another property, you may be eligible for tax exemptions.
Real estate offers long-term advantages in India, especially with the ongoing urbanization and infrastructure development. Owning a property gives you the potential for not only rental income but also asset appreciation over time. While renting provides flexibility and fewer responsibilities, buying a home offers security, equity building, and potential profits down the line. Your decision should align with your financial situation, future goals, and how long you plan to stay in one place.
