Rent vs Buy: Which Option Makes the Most Financial Sense for You?

Before we dive into the rental versus buying debate, remember both sides have their shining moments! The decision could be a mix of finances, social life, and personal needs. So, before picking a side, let's figure out where you fit in this real estate puzzle. Let's uncover the secrets to help you make the right call!

Pros of renting

Lower rent: Rent will be lower than home loan EMI. In Rajkot, you can rent a Rs 1 crore, 4-BHK house for Rs 20,000-30,000, but the EMI with 40% down payment @8.5% will be Rs 52,069 a month for 20 yrs .

Down payment: You don’t have to amass a large down payment amount early on in your career. For renting, you just need to provide a 2-3 month security deposit upfront.

No allied costs: You don’t have to worry about paying property tax, maintenance costs, repair bills, parking costs, etc.

Ease of job sifting: You don’t have to worry about maintaining or renting the house if you need to shift cities or countries for your job.

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

Pros of buying a house

Building an asset: The amount you spend on rent can be used to pay the home loan EMI for building an asset for life.

Tax benefits: You can get tax deduction of up to Rs 2 lakh on interest paid for self-occupied home under Section 24 (b), and Rs 1.5 lakh under Section 80C on principal amount.

Low loan rates, higher appreciation: Currently, home loan rates are low at 8.35%. Property prices are set to appreciate after the fall in the past few years.

No worry of shifting: You don’t have to constantly worry about moving houses if the landlord wants you to leave.

No landlord issues: You don’t have to suffer the landlord’s whims when it comes to maintaining the house or argue over who will pay for repairs, painting and other maintenance jobs.

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

Cons of renting

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

No tax benefits: You do not get any tax incentives for renting.

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

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

Society limitations: You will have to abide by the rules of the society, which can include restriction on pets, limited vehicles, etc

Cons of buying a house

More expensive: Buying a house is more costly than renting. besides the upfront cost of purchase, you have to pay charges for maintenance, property tax, renovation and repairs.

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