Team CrawFin/ Harshal Jawale, CFPCM
Most of us face this dilemma, is it better to buy our own home or should just rent one? Where buying home seems to be ideal option, the other side provides some advantages too. I am here evaluating both options below for your benefit.
Option 1: Renting a home
Advantage 1: Flexibility
Renting a home provides utmost flexibility to stay nearby your workplace or well connected homes. Even in case if you change your job, it is very convenient to move to new place. If you are faced with any financial trouble then you can easily move to home with lower rents.
Advantage 2: Affordability
It is much convenient option to rent a home; rents are much lower than EMIs. If one invests the difference amount and make higher monetary gains. You can also rent home near to your workplace where prices are out of reach and buy affordable home at other location where appreciation in value will be much higher.
Disadvantage 1: Lack of Safety & Freedom
Landlords generally do not allow tenant to stay longer, so you have to vacate the place. Such frequent changing of home is quite nightmare. Modifications, alterations in rented home the way you desire is generally not allowed.
Option 2: Buying a house
Finding perfect home in terms of locality, finances, amenities etc is a tedious job. It sometime takes couple of years to find perfect home.
Advantage 1: Investment
Value of a home increases over time, you could generate considerable profit from your property if you decide to sell it at a later stage.
Advantage 2: Safety, Freedom and Emotional attachment
Owning your home means you can alter your home structure as per your wish. In India there is huge emotional attachment to ownership of house, something that a rented home would never give you, especially for first time home buyers.
Disadvantage 1: Unaffordable
Usually localities where you wish to really purchase a house are very costly. Although home loans are easily available these days, it means paying EMI for as long as 15-20 years. With current interest rates you would pay much more amount than twice the original price of house.
Disadvantage 2: Timing the market
Although real estate is an investment, it requires great knowledge and at times luck to reap significant returns from it. Last three years are good example of investors not being able to make profits from real estate.
Disadvantage 3: Delays & Frauds
These are practical problems that a common man faces while investing into real estate new projects. Infinite delays by builder, land issues, issues related to approval from government agencies makes such investments into horrifying experience for many. Unfortunately even the percentage of such issues is very high.
Need based evaluation
By all means it is always advisable to buy a house that gives you sense of ownership and also creates asset that appreciates in value. Yet if we look from affordability and flexibility point of view rented one seems to be scoring goal.
I feel one should be open minded stay in rented house at nearby to his/her workplace and purchase property at an affordable location which promises higher appreciation in value. Renting it will also share pressure on shoulder towards EMI.
Of course decision making can not only be based on financials, you must consider several other factors as your lifestyle, responsibilities of ownership/renting, taxes etc to arrive at best suit conclusion.
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