Buying vs. Renting A House: A Brief Comparison

Buying a house is a dream for many people in India. But buying vs. renting a house is a big decision. In India, it is observed that people who can afford a house go for buying instead of renting, mainly for comparison.

The Benefits Of Owing A House:

• Buying your own house is a sense of security.

• You will not have to deal with increasing rental rates. When you buy a house on a loan, you are already aware of the EMI required to be paid, which is more stable.

• When you buy your own house, there is less interference in your life.

• A house is an asset that increases in value over time. So, buying a house can be treated as an investment.

• When you buy your house, it’s up to you whether to sell the house to make a profit.

The Benefits Of Renting A House:

• Renting is cheaper than buying a house because there are a lot of costs involved, i.e., down payment, home maintenance, etc.

• It is better for people who have to move to a different state for a job.

• Renting is good for students who move to different states for education.

• Being a renter means if something breaks, you do not have to fix it yourself or pay someone else to fix it. It’s the responsibility of the landlord.

When you rent a property, there is no power in your hands over that property. In fact, the property does not belong to you; it belongs to the owner. The owner has the freedom to change the rent periodically. Also, changes cannot be made to the rented house. The owner would not even let you hang a watch without his permission.

A person who is financially stable and has money can buy a house, whereas a person who is not financially stable can go for rent as paying a large amount of EMI would be difficult for a person who is not financially stable. When you buy a house, you cannot move to different cities as the house is a fixed investment, whereas if you are a renter, you can easily inform the owner 1 month before that you want to leave the house. Tax benefits play a very important role in deciding whether to be a renter or buy a house. Up to Rs. 1.5 lakhs per year, Section 80C of the Income Tax Act of 1961 allows you to claim a tax deduction on home loan repayments. The house rent allowance amount is 50% of the basic salary if you live in a metro city. It is 40% of the basic salary in non-metropolitan areas. The HRA tax is deductible under Section 10(13A) of the Income Tax Act of 1961.

 

Case I (Living on Rent)

Rent: 20,000 (per month)

Rent growth (per annum) of 5%

After 20 years, rent will be paid on a monthly basis = 40,000

Rent (per month) after 40 years = 80,000

2.9 crores will be paid over a 30-year period.

Case II (Buying a house)

Home loan of Rs. 40 lakhs

20-year tenure

The interest rate is 8.3%.

The EMI is 34,200.

The total amount to be paid over the next 20 years is Rs. 82 lakhs.

From the above two cases, it is clear that buying a house would save more. It is also about comfort if, after paying so much EMI per month, you have to say no to your family shopping, holiday trips, new cars, and if you get fired from the company, you are doomed. It is not far for such a crisis to hit. But we should never forget that a house is the only asset we can buy using our debts, and home loans are the cheapest loans as compared to private loans. You can make changes in your home as per your comfort. Good location flats will grow at a rate of 8% on average for the next 20 years. You will not have to move if you own a house, and even if you do, you can rent it out. Buying a home offers financial and emotional benefits such as stability and wealth creation. Homeownership can lead to lower living expenses over the long term, whereas renting is beneficial for the short term.