The housing market has really seen a revolution in the past decade or so. It’s quite surprising how the average rentals have remained the same (depending upon external forces) compared to the price of ownership, which has skyrocketed. We call this situation a market gap, and it’s this gap that raises one of the most important questions in any millennial’s head. That question is “Should I buy or should I rent?”

Consider the following example: For a residential apartment worth 2 crore, the EMI to buy this property would roughly be close to 24 lacs per annum. Now the same property is available on rent for Rs. 5 lacs per annum.


Rent vs. Buy Home

Which is the better option for millennials?


The answer to this question isn’t as easy as we think. For some owning a property is more important than renting it but in any case it’s very important to take an informed decision.As they say that each coin has two sides, let’s see how both the scenes are good and bad.

Buying a Property:

Pros:

  1. Capital appreciation of property is possible
  2. Forced Saving
  3. High social esteem 
  4. Tax incentives for owning a property
  5. Old age security

Cons:

  1. High property price
  2. High interest rates

Renting a Property:

Pros:

  1. Low rentals vis-à-vis capital value of the property
  2. Affordability according to choice
  3. Flexibility to move
  4. Low or NIL maintenance

Cons:

  1. No forced savings
  2. Low social esteem
  3. No tax incentives
  4. No stability

Quick Analysis:

  1. Financial – Yield on property is very low especially as compared to equity / debt investments. In fact, any other asset class can give better yield in the coming few years. Also, the opportunities that existed earlier which could offer 200-300% return have largely been availed by prior generations.
  2. Sentimental – The youth today is extremely “on the go”, and unlike earlier generations does not want to get stuck in low yielding long term investments. Also, the sentimental value attached to a house does no longer exist – people look at it purely as investment, and feel comfortable in staying in a rented house throughout their lives.

Conclusion:

While the urban youth may rent an apartment of his/her choice according to their affordability, it’s advisable that in long term, they keep the good aim of buying a property according to their budget and finances. They should attempt to invest their money into an under construction project of a reputed builder in an upcoming area in any city of their choice. With property market in the slumps, one can look for an attractive term and payment options.

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