The idea of owning a home has always been a prominent one in Indian psyche. Rooted deeply for generations as our nation emerged from freedom struggle, displacement and a period of uncertainty. Buying a house was akin to a rite of passage into adulthood.
Over the years with the rapid urbanisation, this notion was somewhat diluted. As people migrated to cities for work opportunities, the idea of renting a home came to being. It offered them the luxury of mobility and being free to pursue opportunities in other cities without being tied down to asset. Renting out also gave them enough flexibility to live closer to the workplace, and save commuting time and travel expenses.
Cut to mid-2020, COVID-19 has thrown the world into disarray. Amidst multiple lockdowns, a few have chosen to stay back in the place of work while many have chosen to go stay with family. Remote working is now a reality which means employees now have the flexibility to choose where they want to live. Companies are relooking at the future of offices and have offered work from home option to their workforce for an extended period of time.
So, how does the rent vs. own argument play out? Let’s look at both the scenarios.
Why is renting is losing its charm?
Owing to the rise in disposable income and workplaces being increasingly global, major metros across the country attract talent by droves. When moving to a new city, the preference was for renting out a house rather than investing.
The thought was if you are staying on rent, you can easily stay in the area of your choice, share it with others and take out time to decide on long term prospects. If you wanted to upgrade your living quality, you could always rent out a posh apartment or move out anytime and anywhere you like.
But since the outbreak of COVID-19 pandemic those staying on rent are left questioning their choice. Several of those staying on rent have experienced further stringent rules for them compared to those owing house in the society. Those staying in shared accommodations too are realising the value of having their own space.
Why investing in a house worth it?
Disruptions like an economic downturn, job loss, and the pandemic make one very vulnerable to financial problems, emotional toll and high stress levels. When staying in a rented place, the rent which once was affordable now becomes a cause of emotional turmoil.
A home will also provide you and your loved one’s a safe haven during time of crisis. Furthermore, an investment in real estate is not prone to the market volatility like other asset classes. This makes real estate a stable asset to invest in. It is also a safe, tangible asset that will provide security against unforeseen circumstances in the future.
Last but not the least, consider the fact that there are no real returns after paying rent for years, whereas, at the end of an EMI tenure you become the rightful owner of the asset.
So, when should you invest in a house?
As soon as you start earning. For a first time home buyer, the market is filled with a plethora of schemes from the builder, government and banks.
For a young investor, you could look at an affordable house in places which have a high growth potential in the future, for example, near an upcoming airport or metro or a government-designated economic zone. With the Pradhan Mantri Awas Yojana (PMAY), the government is allowing a credit- linked subsidy scheme (CLSS) benefit to first-time homebuyers. You can get an upfront interest subsidy up to Rs. 2.67 lakh if you can fit into the eligibility with respect to your annual household income, location and carpet area of the intended home, etc.
Knowing that your income will be on the upward curve and that you’ll have more employment years, getting approval for a bank loan is easier. EMI becomes much more lucrative and affordable, with the benefit of knowing that you’re going to own the property fully in a few years. When you avail the housing loan, you become eligible for tax benefits which help you save money in the long term. If your purchase comes under the affordable housing category as defined by government authorities, you can get an additional benefit on tax.
Saving substantial tax, investing in a solid property which has the potential to give you better returns in the future and the pride of owning an asset after EMIs get over is an investment worth considering. Investing in a house also means future-proofing yourself against liabilities you might encounter later in life.
Why is it the right time now?
If you are looking to invest in real estate, there is no better time than now. The home loan rate has been on a downward spiral and is currently, at a 15 year low. Furthermore, recently the stamp duty has been reduced by 3% till end of December, 2020. Opting for a ready-to-move-in house will save you the hassle of paying rent as well as EMI. Also, apart from being able to buy what you see, it will save from uncertainties around possession timelines that you may face with under construction properties.
A recent compilation by JLL and CREDAI reported only 2,600 of the total 77,460 unsold residential units across Mumbai, Thane and Navi Mumbai are ready for possession. In the last quarter, Lodha alone has sold 1800 units and sales were more inclined towards ready. This clearly indicates that there will be a demand-supply crunch in the coming times and it’s important to take the decision sooner and secure your safe haven.
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