Real Estate in India: Why staying on rent may not be smart move - 10 reasons

Wed, 03/01/2023 - 09:07

Author: ZeeBiz Webteam


Real Estate in India: Why pay rent when you can pay your EMI and own an asset? This is the hottest argument we have with our parents, friends, or bank relationship managers. But in reality, it makes sense because house value increases but you don't get anything from the rent you pay to the landlords.

But as you go deeper this argument also has many flaws and the reason behind it is the insane cost of real estate in India and our approach to buying it.

Atul Goel, MD, Goel Ganga Group said, "Over the past 20 years, the price of housing has increased faster than the increment in our salaries. People aged between 25-30 years who own a house was 55% in 1997 whereas it is now close to 34% according to a report given by Institute For Fiscal Studies and the situation worsened when rents reach nearly 25% of monthly income.

10 reasons why staying on rented house is not smart move

1) Buying a house offers financial and emotional benefits such as creating wealth for self and getting stable. Buying a house can help owners build wealth as well as the value of property increases over a time period.

2) By investing in a house and then selling it, homeowners can add to their wealth and can also use it to upgrade their dream house whereas renting involves just one recurring monthly cost which is rent that is given to another individual but doesn't add to your wealth as well.

3) A rented house is not an asset, in other words, we can say that rent is a monthly expenditure but buying a house is a generous investment with relatively stable values. So the homeowner's balance sheets are thus significantly upgraded by their property purchases which definitely can be called a smart move.

4) Atul Goel noted that by owning a house, owners can leverage their increased net worth in many ways including taking loans against the owned property.

5) Owned homes can act as a source of income if the owner desires. For example, they can rent a part of their home and can have income easily, or else if they don't want to stay in that particular property they can also use it as a commercial alternative by providing rental services like homestays and others. For a house, owner rent is an excellent source of income in various other ways.

6) With rental properties, landlords usually have the option to increase rent over a period of time or even when the rent agreement is renewed which makes renting a progressively expensive option for tenants whereas house ownership is free from such huge pressures as the time and amount of payment to be given is already fixed at the time of buying and more of it the property price gets increasing day by day.

7) With rental properties, landlords not only have the right to increase the rent but can also evict tenants by serving them a notice period which as a result creates great difficulties for tenants to find another rented property in that short period of time.

8) Another trouble which has nowadays been seen is in the case of renovating the living house. The tenants are unable to do so as the rent agreement doesn't allow those perks but house owners are greatly comfortable renovating their living homes and can design them as per their choice.

9) In the case of financial stability, renting a house also has many disadvantages. When you are a tenant instead of a house owner you miss out on the opportunity of getting tax benefits which affect your credit score and in return, it doesn't add anything to your wealth creation.

10) Owning a home also offers an opportunity for passive income whereas, in the case of rent, there is no such scenario.

Atul Goel added that "we can say that house ownership provides a sense of stability which encourages people to get settled down and free them from the fear of rent or elimination from a rental house and gives you freedom of creating design for your dream house moreover anything it helps you generate passive income."

Therefore from both emotional and economical perspectives buying a house offers many advantages over renting. Thus, we can conclude that renting a house is not the smartest move.

Source: ZeeBiz