Owning a house is one of the most important financial goals for the common man; and also one which requires a huge monetary commitment. Buying one’s first house for self occupation is regarded more as an asset than an investment made for capital appreciation or gains. But the sky rocketing real estate prices, especially in metro cities like Mumbai, Delhi and Bangalore have made investing in a property almost impossible. Here comes the dilemma- Whether one should still go ahead, take a huge loan, compromise on your lifestyle and cut down other expenses to service the sizeable monthly loan installment for almost their entire working life, or simply go in for the more affordable rental accommodation?
Consider the following factors which will help you decide-
- If you live in one of the above mentioned metro cities, renting out could be a better option since the capital values in such cities are significantly higher. For Eg. – In Mumbai in the suburbs, monthly rental for a 2 BHK flat would be around Rs. 30,000/- per month, whereas buying the same would cost upwards of a crore. Considering that banks lend only up to 80 or 85 % of the value, a significant part of it would have to be self funded, leaving you with little or no savings and servicing such a huge loan would require a huge monthly outlay. In smaller cities like Baroda, buying a 3 BHK house would cost just about than half this amount, hence buying is a better option.
- If you are in a transferable job, owning a house would make it difficult to shift with all the fixture and furniture. Also, the house would either have to be rented out or sold-which is not an easy job as real estate transactions are relatively illiquid, tedious and time consuming. In such cases, renting a house is more flexible and hassle free as it is easier to shift without any paper work or transactions.
- One of the most important factors is the monthly household income of the family. Either the husband should be earning really well or both the husband and wife should be working so as to be able to jointly share the EMI burden in the event of buying a house on loan.
- It is more feasible for couples who are young and have at least 20-25 years of working years before retirement to take a loan and invest in a house property, since they can take a longer duration i.e. 20-25 year home loan thus reducing their EMI.
- Some of the other things to keep in mind are the tax benefits of buying a house – principal amount paid up to Rs. 1 Lakh u/s 80 C and interest paid on loan amount of up to Rs. 1.5 Lakhsu/s 24 B. Also, try and invest in property at the right time and price- though it isn’t exactly easy to time the market. Low interest rates and depressed property prices are the indicators.