Should you buy or rent a house? Top points to know before taking any property decision
Rent versus buy question continues to perplex many people across salary brackets. Significantly, what should always be kept in mind is that you should not follow one-size fits all approach.
With housing prices rationalising, coupled with the decrease in home loan rates of interest, the debate of rent versus buy has picked up momentum. After a lot of steps taken by the government to streamline real estate, millennials are fighting the urge to buy a home.
A lot of people will come and tell you that you can stay at lower rent then what is the need to buy? However, the scenario is that if you do not buy a house in lakhs now, you will not be able to buy it even in crores after a few years.
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Speaking on the matter Harvinder Singh Sikka, MD, Sikka Group said, "Buying a house is one of the biggest financial decisions one takes in an entire lifetime and the dilemma of ‘rent versus buy’ continues to perplex many people. Always keep in mind that you should not follow one-size fits all approach. The decision has to be made in your financial situation, which differs for different people."
Sikka went on to add that millennials are realising this as they are constantly working on their finances and weighing the option of buying a home that will help them build a property, which can give them good returns also in case, they want to sell after a few years.
Asked about the major factors that can help a person living in a rented house to take a proper decision whether to continue living in a rented house or to buy her of his own house, Sikka said that lifestyle, distance from basic requirements for life, financial viability and affordability, ability to repay bank loan, location and price risk, etc. are all important factors that one must think off before deciding to move from a rented house to buy one's own house.
When it comes to deciding on where to live many factors come into pictures such as lifestyle, proximity to the place of work, schools, hospitals, etc and personal preferences. Then the decision to rent or buy also depends on the investments required and the funds available at hand.
A lot of people think that they just have to make 10-20 per cent down payment and the rest will be given by the bank. However, experts feel that until and unless you are able to make down payment of about 40 per cent of the house cost, the risk is too high. With high disposable income, millennials have started working on arranging the maximum down-payment so as to cut down on EMIs, and they are keeping it at the level that is lower than the rents in good locations of Delhi.
When you buy a house you have a responsibility towards it and it means not only the payment of EMI but also the maintenance charges. You have to manage expenses so that you meet the demands of owning a house, unlike the time when you live on rent. It is advisable to that you make an estimate of how much you can afford and do not just limit yourself to an estimation of EMIs but other expenses too.
The foremost thing to judge how a particular location is going to develop in the future before making a decision. In metro cities where there is space crunch most of the development is happening in the suburbs and thus this consideration is of utmost importance. Noida has come out as the best places that has everything that a homebuyer looks for. Millennials also want to avoid the pain of shifting time and again from the rented flat. The mindset that is working is that once you own a house, you automatically get settled.
When it comes to buying ownership is an issue. This comes up in case prices are expected to fall. If you are deciding to live in the property then it might not hurt but in case of investment, this factor comes as a shock. So if you have to keep a tab of the price trends and the likelihood movement of prices when you decide to buy a property. However, when renting this risk is minimal as you can always move to a place that is more financially suitable for you.
When millennials take a decision to buy then they are also taking into consideration the fact that they have to adjust many things that are part of their lifestyle. The cost of owning a hose might force them to control their travel expeditions or their shopping splurges. Here they are deciding on the adjustments and making up their minds to buy to secure a good future.