Take Switzerland, for example. Despite having the highest number of millionaires per capita, only about 42% of its population owned a home in 2022, according to Eurostat, which is part of the European Commission. Switzerland’s home ownership rate is the lowest in Europe because most people find it unaffordable to buy property.
Home sales in India are booming. According to the latest economic survey, 2023 was the best year for home sales in India in a decade. At the same time, prices also rose substantially. Mumbai recorded the third-highest price increase among all major cities in the world between January and March 2024. Delhi ranked fifth.
In Bombay, People have to shell out more than half of their monthly income in monthly installments (EMIs), according to a recent report by Knight Frank.
Over the past four years, property prices in India have increased by an average of 46%. While still relatively affordable, cities such as Hyderabad and Noida have seen even more significant increases, with price increases of 78.6% and 69% respectively over the past four years.
Given the growing income disparity within the population, housing prices are reaching the limits of affordability for many.
So, Which is the best option for you?
Take the average price of a home in Mumbai, which is ₹94 lakh, according to an online property listing portal. In most areas of India’s financial capital, it is possible to get a reasonably sized 1 BHK apartment (bedroom, living room and kitchen) or a small 2 BHK apartment.
At current interest rates of around 8.75%, the EMI would amount to a little over ₹83,000 per 20 years. That’s Rs 996,000 per year. Let’s round it up to Rs 10 lakhs.
Now, you could find a similar-sized apartment for a monthly rent of, say, ₹30,000. The annual outlay is ₹3,60,000, which leaves you with around ₹6 lakh every month, which you could invest in assets that could give you a better return.
At ₹30,000 per month, the rental yield would be more than 5%%, If the property value is estimated at ₹94 lakh, the rental yield is generally considered to be more than 2%. expensive. Meaning you could find a cheaper place to rent, but let’s assume that Rs 30,000 is a reasonable figure for, say, living closer to your workplace or your kids’ schools.
So what?Our annual rent is ₹3.6 lakh and You can invest Rs 50,000 per month in systematic investment plans (SIPs). Assuming a return of 12% per annum, your investments would be worth Rs 4.3 crore per month. end of 20 years.
“Over the past decade, property prices in cities like Mumbai and Delhi have grown by 6-10% annually,” he said. Vishal Raheja, Founder & CEO of InvestoXpert.com, a real estate company.
On paper, assuming an 8% annual appreciation, the The value of the property would be the same: Rs 4.3 million. However, empirically speaking, a buyer is unlikely to pay that price for a 20-year-old two-bedroom property. Moreover, if he were to take out a bank loan to buy the apartment, he would pay close to Rs 2 million to own it. including The interest.
This calculation may be different for people in other cities where apartments cost Much less than in Mumbai.
However, people Consider other factors before deciding whether to buy a property or rent it.
“Renting offers flexibility and proximity to workplaces without the huge financial commitment that buying entails. However, buying has its advantages, such as asset appreciation and the freedom from rent increases. It all comes down to finding what suits your lifestyle and financial situation,” said Sunil Sisodiya, founder of Geetanjali Homestate, a real estate firm in Gurugram.
Like property prices, rents can also be expensive.“In Noida, rental yields have grown to 3.70 per cent in 2024, up from 3.20 per cent in 2019. This increase is making renting less affordable over time, leading many to reconsider home buying,” said Ashish Bhutani, CEO of Noida-based Bhutani Infra.
The final result
Whether you should rent or buy depends on your financial situation, lifestyle and long-term goals. Renting offers flexibility, especially for those who are at the beginning of their careers or who prefer mobility when commuting for work. Buying a home can be a smart long-term investment at the right price.
In the end, There is no universal answer; the right choice varies depending on individual needs and preferences. As Sisodiya suggests, a hybrid approach – renting short-term and saving to buy later – can offer the best of both worlds.
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