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April 15, 2022

Know whether to Buy or Rent properties

by CA Shivam Jaiswal in Compliance Law, Income Tax

Know whether to Buy or Rent properties

While owning a home is traditionally every Indian’s ambition, skyrocketing property prices, particularly in metros, have led to individuals preferring to rent rather than buy. Those who can afford to buy a home, on the other hand, have a difficult decision between buying and renting. In India, it has been noticed that people who can afford to buy a house place a higher value on having a home, with renting serving as a compromise. According to current situation property prices are stable , this is the right time to invest in properties. For example, person A is earning 60000 per month and having job in Mumbai, either he should go for rent a property or go for home loan EMI. Instead of blindly following someone’s advice, consider the following Advantages and disadvantages of renting and buying property before taking a decision.

Advantages of renting property

1. Lower Rent:

Rent will be lower than home loan EMI. In NCR, you can rent a Rs1 crore, 3-BHK house for Rs 15000-25000, but the EMI for the same with 40% down payment at 7% will be Rs 46,500 a month for 20 yrs.

2. Down payment:

You don’t have to put down a huge sum of money early in your career. You only need to put down a security deposit of 2-3 months when renting.

3. No allied cost:

You won’t have to worry about paying property taxes, maintenance, repair bills, or parking fees, among other things.

4. Ease of job shifting:

If your employment requires you to move towns or nations, you won’t have to bother about maintaining or renting your home.

5. Flexibility of location:

You can decide where to rent depending on proximity to workplace or school, reducing your transportation costs.

Disadvantages of renting property

1. Rent rise:

Besides the annual rise of 8-10%, the landlord can increase the rent anytime or ask you to evict.

2. No tax benefits:

 You don’t get any tax incentives for renting.

3. No freedom:

You have no choice of altering or making structural changes to the house without the approval of landlord.

4. Outflow after retirement:

You will have to continue to pay rent after you retire when you have no source of income.

5. Society limitation:

You will have to follow the rules of the society, which can include restriction on pets, limited vehicles, etc.

Advantages of buying property

1. Building an asset:

The amount of rent can be used to pay home loan EMI for building an asset for life.

2. Tax benefits:

You can get tax deduction of up to Rs 2 lakh on interest paid for self-occupied home U/S 24 and Rs 1.5 lakh U/S 80 C on principal amount.

 3. Low loan rates, higher appreciation:

Currently, home loan rates are low at 6-7%.Property prices are going to increase in next few years.

4. No worry of shifting:

You don’t have to constantly worry about moving houses if the landlord wants you to leave.

5. No landlord issues:

You won’t have to suffer the landlord’s instincts when it comes to maintaining the house or argue over who will pay for repairs, painting and other maintenance jobs.

6. Emotional security:

Having one’s own house provides peace and mental stability and the freedom to keep it as per one’s wish.

Disadvantages of buying property

1. More expensive:

Buying a home is a lot more pricey than rental. Besides the direct price of of purchase, you have got to pay charges for maintenance, property tax, renovation and repairs.

2. Illiquid asset:

Real estate has much lower liquidity, which means that if you need the money, you cannot sell a house immediately.

3. Depreciation:

As has been seen in the past few years, there is no guarantee that property price will always rise.

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