Buying makes sense for those planning to stay in a city for at least 7 to 10 years.
Financial preparedness is crucial.
Recent data from Anarock Group indicates that capital values in key micro-markets of India's top seven cities rose more sharply than rental values between 2021-end and 2024-end.
However, for end users, the decision to buy or rent should be based on considerations that extend beyond market trends.
Build equity, enjoy appreciation
Purchasing a house provides a tangible asset that appreciates over time.
"Equity building and property appreciation lead to long-term financial stability," says Santhosh Kumar, vice chairman, Anarock Group.
Homeownership offers security.
"Homeowners are able to avoid uncertainties like rent hikes or lease terminations," says Vivek Rathi, national director, research, Knight Frank India.
Buyers also benefit from tax deductions.
"Home loan borrowers get deductions under Sections 80C and 24(b) of the Income-Tax Act (under the old regime)," says Rathi.
A house can also serve as an instrument for legacy planning.
"Besides providing shelter to the buyer, it paves the way for the creation and transfer of wealth to the next generation," says Chakri Lokapriya, chief investment officer, equities, LGT Wealth India.
High upfront costs
Homeownership, however, involves significant costs.
"There are upfront costs, like down payment and registration, followed by ongoing maintenance expenses," says Hitesh Singla,co-founder and CIO, SquareYards.
The down payment alone ranges from 10 to 20 per cent of the property value. Buyers may also have to bear brokerage fees.
Rathi points out that a home loan, which can last for over a decade, can impact the liquidity of young couples.
An incorrect purchase decision can prove costly.
"If the house is purchased in a deficient project or location, that can impact the buyer's lifestyle, finances, and the property's resale value," says Kumar.
A house is an illiquid asset that is difficult to dispose of quickly if one needs funds urgently.
"Buying a house also reduces the flexibility to relocate," says Singla.
Are you financially prepared?
Buying makes sense for those planning to stay in a city for at least 7-10 years. Financial preparedness is crucial.
"One should have the financial bandwidth to make a sizeable down payment and manage the long-term financial commitment that a home loan entails," says Kumar.
Buyers should be able to bear the maintenance costs. The purchaser's financial condition must be stable.
"Your income must be steady.
"You must have adequate savings to make the down payment and also have an adequate emergency corpus," says Singla.
He adds that buying makes sense for people seeking to diversify the assets in their portfolio.
Impact of market conditions
End-users should ideally buy during a downturn.
"Those planning to live in the house should buy when prices are stable, affordable, or witnessing a slight downturn.
"Purchasing when prices are already very high and increasing rapidly amounts to buying at the top of the market," says Singla.
A buyer's market, according to Rathi, is one characterised by low property prices and high inventory.
Market timing, however, is less critical for long-term homeowners.
"If you are buying a property for long-term use of 10 years or more, and subsequently plan to pass it on to the next generation, then timing the market is not essential," says Lokapriya.
Investors, on the other hand, should tailortheir strategies according to local conditions.
Those looking for long-term capital appreciation should target high-growth markets.
"Those planning to earn from rentals should zero in on localities where rents are rising steadily," says Kumar.
Renting: Benefits and drawbacks
Pros
- Requires lower upfront costs; security deposit is much lower than the down payment for buying a home
- Tenants avoid exposure to property price fluctuations
- Provides flexibility to change location
- Minimal maintenance responsibilities
Cons
- Does not build equity in the property
- No benefit from property appreciation
- Uncertainty due to potential rent increases
- Risk of eviction if the house is sold or the lease is not renewed
Disclaimer: This article is meant for information purposes only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products/investment products mentioned in this article to influence the opinion or behaviour of the investors/recipients.
Any use of the information/any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.
Feature Presentation: Ashish Narsale/Rediff.com
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