Renting vs Buying Home

“Should I buy or rent a home” is a question which keeps coming in our minds.
There are unlimited number of articles on internet that claim that real state is no longer and attractive option. But is it? let’s find out.
Let’s start with pros and cons of renting and buying a house. 

Renting

          Pros.

  • Income tax benefit on HRA
  • Less upfront cost and paperwork
  • More mobility
  • Can divide rent with tenants(friends or colleagues)
  • Option to move in cheaper room to cut expenses

          Cons.

  • Landlord can increase rent after agreement expires
  • Doesn’t create any asset
  • Delay in maintenance
Buying

          Pros.

  • No landlord to answer to 
  • More stability
  • More tax benefits
  • Improve , upgrade , change home
  • Emotional satisfaction
  • Freedom 

          Cons.

  • High upfront fee and paperwork
  • Responsible for repair
  • Home maintenance
  • Much longer commitment
  • Property tax

Let’s dive into the details.

Income tax benefits : Renting and buying both save taxes , but renting can provide tax exemption upto a maximum 50% of your basic salary whereas home loan can provide tax exemption upto a maximum amount of 5 lakhs (1.5 lakhs under section 80C, 2 lakhs under section 24, 1.5 lakhs under section 80EEA (only for 1st time buyers).
So, the winner here is buying.

 Upfront cost and paperwork : Here renting is a clear winner.

Mobility : Renting provides high mobility. Changing cities is very easy with renting , you just have to give a notice to your and landlord and after a month or 2 month , you are completely free. Home have low liquidity and selling and buying takes a lot of time and paperwork.
So, the winner here is renting. 

Stability : Buying a home can provide you a high stability i.e you can always stay in that home, but that’s the case you are renting and landlord sells the home. Same is the case if the locality progress a lot , then landlord can change the rent to whatever he wants but home loan EMI will be constant. 
So, the winner here is buying.

Financial crunch : If you are in a financial crunch due to any reason like recession or health issues etc, it is always to be easier to pay to rent than to pay home loan EMI (which is usually more than 2 times of rent even for a loan for 20 years). You can move to home with cheaper rent very easily.
So, the winner here is renting. 

Building asset : Buying a home is an investment to build asset. Home prices in most cases move upwards and on top of that you save rent.
So, the winner here is buying.

Maintenance :  Owning a home comes with a responsibility of maintenance and repairs , although maintenance charges may be paid by tenants, you have spend some time. But the positive point is that you don’t have to wait for any landlord to get something repaired.
So, it’s a tie.

Freedom : Owning a home gives a lot of freedom which renting might not give like owning a pet, changing the home interiors and many more.
So, the winner here is buying.

Emotional satisfaction :    Buying a home gives emotional satisfaction as it is symbol of accomplishment.
So, the winner here is buying.

 

Conclusion

Renting and buying have their own pros and cons. 
Your decision plan should consider all above points and the below points.

  • Rental yield of desired location.
  • Property price trends.
  • Income tax benefits.
  • Future plan of settlement.
  • RERA approval buying buying.
  • Always avoid using cash for payments.
  • Budgeting – It is recommended to have home loan in which EMI is less than 40% of your income.
  • Legal verification of property.
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