Summary of this article
Renting offers flexibility and lower monthly costs.
Buying builds long-term stability and asset ownership.
Choice depends on finances, goals, and lifestyle needs.
The debate between renting and paying the equated monthly instalment (EMI) towards a home loan has intensified a lot in recent years. One reason is the rise in property prices at a higher pace than rise in income levels across Indian cities. For young professionals and first-time homebuyers, this decision carries a long-term financial impact, too. If made without discretion, people can face the downsides of their real estate purchase.
For most, the common belief still remains that buying a home is always better than renting. However, affordability, flexibility, tax benefits, market conditions and jobs have a deeper influence on this decision-making – whether an individual is ready to invest in a property or stay on rent. Understanding where renting would make sense for you and where buying would be comfortable without it becoming a burden is a vital decision that an individual can only make if he/she is able to analyse his/her individual financial goals and standing.
Harsh Gupta, founder of SIP Yatrra and a personal finance professional, explains how one can make a more sound decision when it comes to this dilemma.
He says, “Renting is often a better financial decision because it’s usually cheaper and gives you flexibility as compared to home loans. In India, rental yields in India are just 2-3 per cent which makes renting financially more economical in many cases.” This rental yield structure makes renting more efficient, especially when compared to the high EMIs one has to bear while purchasing a property.
However, he also shares insight for people who are interested in homebuying. “If someone planning to buy their first home, then I will suggest he/she should go for a home loan because it builds a long-term asset and gives you the stability, and most importantly, ownership right that renting can never offer.”
Perks of Renting
Renting offers more flexibility, which is a major advantage for today’s youth, most of whom are in a mobile job. A rented space allows individual to adapt to their changing circumstances, workplaces, lifestyle and financial shifts without worrying about selling the property or managing it from afar.
In many Tier I cities, the cost of monthly EMIs can be in multiples of the monthly rent for the same property. This difference frees up cash flow, and allows people to invest more in other investment instruments or even support a better lifestyle.
One drawback in renting over a long duration is that if an individual had been paying home loan EMIs over the same timeframe, they would be creating a tangible investment over time. They would have a property as an asset by the time the EMI cycle for the home loan completes.
Why Buying a Home Feels More Reasonable to Many
The long-term argument and belief that having a home in your name is more stable still persists and is just as valid. Rent increases annually and is influenced by unpredictable market conditions.
Home loans, on the other hand, offer a more predictable and manageable EMI schedule. Even if the interest rates fluctuate time to time, borrowers can have clarity and plan their budget and finances more effectively.
For many people, buying a home remains an emotional decision more than a financial one. Home ownership is a symbol of stability, security and independence for individuals.
There is no universal answer to which is better, the answer remains situational to people and their current needs and plans. The smarter choice is to budget your finances and know if you are comfortable with renting or are ready to invest in a property for the long run.
