In the journey of love, sometimes the road takes an unexpected turn. Picture this: your friend, smitten with a girl, decides to meet her parents. All is going well until they pop the dreaded question: “Where do you live?” He confesses it’s a rented apartment, and just like that, the castle of dreams starts to crumble.  

It’s a scene we’ve witnessed too often. But let’s flip the coin. Have you noticed how discussions on property – buying versus renting – are ever-present in our conversations? In this article, we’ll dive into this topic, exploring which option reigns supreme. 

Overview of the Real Estate Market 

As housing prices are going up but still people feel positive about buying homes. According to the reports by JLL, by the end of 2023, around 2.6 lakh houses were sold. This is the highest number since 2008, and in 2024, it’s expected to reach about 3 lakh units with higher prices tending to remain the same due to a lack of real estate inventory. 

The report by JLL suggests that in 2024, the housing market will stay strong and keep growing. People are showing interest in buying homes, in the mid and premium segment houses. 

Even in the election year, the demand for houses will keep growing and big companies are buying land in good spots in cities, and they’re planning to build more houses. Companies are focused on providing a variety of houses like plots, small apartments, and villas. A report by Anarock suggests that the top seven cities in India will see a hike of 33% in property prices in the next three years. 

Benefits and Challenges of Buying Real Estate 

Stability and Security: Owning real estate helps you with a sense of security and helps make you free from the uncertainties of rental agreements. And independence to modify the property as you want. 

No Rent Payments: Owning a property is like investing in assets which appreciate over time and help to eliminate monthly rent payments. 

Potential Appreciation: Appreciation in the price of the property is like a bonus, as the well-located properties tend to appreciate in prices over time and give you potential gains when you sell it. 

Challenges in owning a Real Estate: 

High Initial Cost: Buying a property comes with upfront expenses like down payments, registration fees and legal charges. These costs are a significant portion of the total cost which will require proper financial planning. 

Illiquidity: Real Estate is an illiquid asset. While selling the property it takes time, and finding a potential buyer. The funds are not accessible that early compared to other asset classes. 

Maintenance and Repairs: The property owner is responsible for the maintenance and repairs; one should consider this and budget it accordingly. 

Market Risks: Real Estate market can be volatile and goes through the business cycle. Also, it depends on the economic trends of the country like interest rates, etc. Location plays an important role in the future price of the property. 

What about renting a property? 

Financial Flexibility: Renting a home in India does not require a high upfront cost. You just have to pay a fixed amount to the owner. 

No-Property Tax: As you are just paying the rent and you do not hold any equity in the property; you are not liable to pay tax. Your owner is liable to. 

Mobility Flexibility: If you’re into a job that requires you to move to different locations, renting a house is a comparatively good choice. 

Cons of Renting a Home 

Limited Control: Renting a home does not give you adequate control over your living space. You can’t renovate or make changes to the interiors until you have your owner’s approval. 

Continuous Increase in the Rent: The owner of the property might increase the rent at the end of each lease term. Over the period, it can lead to higher housing costs. 

No Equity Building: Paying monthly rent does not build equity as payments will add to the owner’s wealth. Since property rates continuously increase in India, you will miss the opportunity for wealth creation.  

List of cities with average property Price, Rental Yield, and Price Appreciation: 

City Average Property Price (₹ Crore) Rental Yield (%) Price Appreciation (Estimated Yearly) 
Mumbai 1.5+ 3-4 5-7% 
Delhi (NCR) 1.2+ 5-6 6-8% 
Bangalore 1+ 4-5 7-9% 
Pune 0.8+ 3-4 6-8% 
Hyderabad 0.7+ 4-5 8-10% 
Chennai 0.8+ 4-6% 
Kolkata 0.6+ 3-5% 
Source: Websites Magicbricks, 99Acres, Makaan, CREDAI, JLL Research, MoHUA, RBI

Regulations Related to Owning or Renting a Property: 

Property Ownership: The Transfer of Property Act has laid down rules for buying and selling property in India. 

Rental Agreements: A written agreement protects the tenant and owner of the property, including rent amount, duration, maintenance responsibility, etc. 

Real Estate Regulation (RERA): In 2016 the law was made to protect homebuyers by ensuring developers register projects, disclose details clearly, and follow timelines. 

Conclusion

In India, purchasing a property offers stability and potential for growth, but it requires a significant upfront investment and comes with ongoing responsibilities like property tax. On the other hand, renting provides flexibility and exempts you from property tax, but you do not own the property and may face rising rental costs. Despite these factors, many Indians aspire to own their homes. Therefore, it’s crucial to consider your goals, financial situation, and local regulations before determining the best option for you.