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Rent Vs Buy
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Should you be a home a home owner?
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It is always an Indian mindset to be a proud Home Owner. Keeping in mind the circumstances one is it is always confusing whether to keep the liquidity one has into those money spinning stocks, bonds, mutual funds or end of the day into that family house.
We guess that if one has some properties may be in a different city or any other ancestral acquisitions then it is a different thing all together, but being a small entrepreneur or being a salaried employee you do have certain limitations and dilemmas in life whether to go in for the rented one or own one.
We at realestatemumbai.com have experienced this over the years experimenting on different people and their personal issues. We would like to share with you the general perception to enlighten you a bit more if you are also one of those looking to buy a property and looking to transit from a rental to an ownership.
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| If you are living in a rented accommodation… |
We are sure you are constantly worrying about having to pay your monthly rentals and some feel it is also money down the drain! This must form a significant portion of your income!
So should you shift from rental to an ownership situation? Simple math with assumed numbers would help you understand the pros and cons of both situations (Refer Table 1).
Table 1
For example if you own a house in Lokhandwala Complex, Andheri West which is a 2 bedroom in a good building and worth Rs.35.00Lacs
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You live in a rented accommodation |
You are a home owner |
| Cost of purchasing a home |
Not applicable in this case |
Rs.35,00,000 |
| Security deposit (usually ‘interest-free’) |
Rs.100,000 onwards |
Not applicable in this case |
| Monthly outgo in the form of rentals |
Rs.19,000/- |
Not applicable in this case |
| Monthly maintenance costs of the home |
Paid by the landlord (thank God for small mercies!) |
Insignificant if your home is well-maintained but approximately Rs.3000/-
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| Tax breaks available |
Whatever tax deductions from the Company you get it is your internal look out. |
You can get depreciation and you can get tax deductions if you take up a home loan. |
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With cheaper rate of interests between 7.75% to 8.50% per annum and newer properties available in the market with amenities and if you have long term plans in Mumbai then it may be a wiser decision to buy a property. But at the same time, if your budgets do not permit you to do so and you are uncertain of your future then there is no better option then a lease option.
A decision between buying and leasing is totally personal and it should not be influenced by pressures, never forget housing is a basic necessity and life style living may be a social obligation, which one needs to comprehend whether the same is required or no.
The table clearly indicates that initial payment of owning a home is high compared to living in a rental accommodation. However, monthly cash outgoes are ‘killing’ in case of the latter with your rental eating into a significant portion of your income. But if you need to stay in a quality and good house you need to spend that kind of money it is no longer a commercial decision it is a basic need of life.
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