A home is much more than just four walls and a roof. It evokes a range of emotions and thoughts. For some, it is a sense of security; for others, it symbolises comfort, status, or accomplishment. However, there is also the financial aspect to consider. Buying a home is often the largest financial transaction in an average Indian's life. The decision to rent or buy is one many grapple with.
When you own a home, you're in control. You don’t have to deal with a landlord, whether it's for minor repairs or a complete overhaul of your entire home. Living on rent is a hassle in many ways. You're dependent on the landlord for water, electricity, maintenance, and almost everything else.
When you buy a house, you provide your family with their own space—a home. After a long day at work, coupled with a tiresome commute and ongoing stress, returning to your own nest offers a sense of security and comfort that is irreplaceable. There is truly no place like home where you can be at ease and be yourself.
Owning a home eliminates the fear and anxiety caused by the possibility of an untimely lease termination by the landlord. There's also no hassle of renewing the rent agreement every year or renegotiating the rent repeatedly.
Rent is an expense, and the general tendency is to reduce it. This might lead to compromising on aspects like location, size, and amenities. On the other hand, when you buy a house, you ensure that the property you choose meets your expectations.
Owning your dream home has become easier with the availability of financing options. You don't have to wait until your 40s or 50s to save up for your dream home. You can buy it in your 20s and be a proud homeowner, with the home fully paid off by the time you turn 50 or even earlier. By carefully choosing a home loan lender, you can tailor your home loan EMI to match your present and future income patterns.
The principal and interest repayment of your home loan provide attractive tax breaks. Renting, on the other hand, is more expensive than the rent you pay. The cost is higher since you're not earning interest on the deposit amount paid to the landlord (which can be quite high in premium locations) throughout the lease term.
Instead of paying rent, which is a pure expense, you pay your home loan EMI, thereby building your own asset over time. With every EMI payment, your equity in the home increases.
If you're likely to stay in a particular city long-term, it makes sense to buy a house. It gives you a sense of belonging and permanency. Property prices generally appreciate over the long term, and by buying a home, you're also enhancing your wealth. Delaying your property purchase means you'll have to invest a higher amount (in addition to paying rent for an extended period).
Finally, buying a home is seen as a symbol of accomplishment and success in society. Your wealth and status are often measured by the home you own. Thus, by purchasing a house, you can significantly enhance your social status.
While the above advantages of homeownership are qualitative, there is also a quantitative side to the rent vs. buy debate. How do the two options stack up purely based on numbers? Here's a comparison:
Consider Sanjay, 25. There are two scenarios: In one, he buys a house at age 25 when he has just settled into his permanent job. In the other, he continues living in rented accommodation and invests his savings in a bank deposit at 8% interest. The home's initial value is ₹40 lakh in both cases. For the home purchase, he takes a loan of ₹30 lakh for 25 years at an interest rate of 9%.
Note: Taxation is ignored for simplicity in both scenarios.
The example clearly shows that buying a home makes financial sense. Sanjay would be nearly ₹1 crore wealthier if he opts to buy a home rather than rent. This difference is even larger when considering the tax benefits on home loans.
Whichever way you look at the question of "rent or buy," buying makes more sense. With improved affordability due to higher incomes, greater disposable incomes, easy and innovative loan options, and tax incentives, purchasing a home is an attractive proposition.
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