The decision between buying a home or renting one is important and must be made carefully. Both come with their own sets of pros and cons. Renting a house can be more affordable in the short run as the costs are lower than buying a house. However, purchasing a house helps create a tangible asset with potential financial growth.
Adhil Shetty, CEO of BanakBazaar.com, said that while renting may be more flexible as you can change locations whenever you want, buying a house provides financial stability and peace of mind. Renting or buying is not a once-in-a-lifetime decision. “You can always go back to whatever your financial situation or lifestyle demands later,” said Shetty.
So, let’s delve into the pros and cons of buying a house versus renting one to decide which one is better for you.
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Pros of home buying
Building a long-term asset: A house is a long-term asset that can help you build equity.
Fixed EMIs make budgeting easier: Home loans equated monthly installments (EMIs) are set based on your interest rate and your repayment period.
Tax benefits: You can take tax benefits under Section 80C and Section 24 by opting for the old tax rate regime.
Homeownership provides a sense of accomplishment: Homeownership is among the third most cherished goals for Indians, according to the BankBazaar Aspiration Index 2023. Pros of Home Buying .
Helps to diversify your portfolio: Real estate investments, such as a house, can provide stability to your portfolio.
Cons of home buying
High upfront costs: Expenses such as the loan down payment, registration fees, stamp duty, etc., can be a considerable amount that can dent your savings.
Reduced flexibility to move: If you have purchased a house to occupy, it is much more challenging to move. Shetty says, “Renting allows greater flexibility. You can give the requisite notice to your landlord; find a house in a locality you like and shift there.”
Long-term maintenance: Any property, whether it is an independent house or an apartment, will require long-term maintenance in the form of routine repairs, renovations, and general maintenance of the house.
Real estate is not a liquid asset: It is considered an illiquid asset as it cannot be converted to cash quickly.
Pros of renting
Lower upfront costs: Living on rent may be more economical in the short term for monthly rentals, and security deposits are usually lower than home loan EMIs.
Greater flexibility to move: One of the biggest advantages of renting a house is that you can move anytime you like without worrying.
Flexibility to invest in high-performing avenues: “Given that rent is typical than a home loan EMI, the additional income you have at your disposal can be invested in high-return investments that can provide you greater returns to build a fund for your future goals,” said Shetty.
HRA tax benefit: You can avail of a House Rent Allowance (HRA) tax benefit by providing rent receipts to your employer.
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Cons of renting
No ownership: When you rent a house, it is not owned by you but temporarily leased out to you.
Increasing rents: Most landlords increase house rents by an average of 5-10 per cent yearly, or sometimes more.
No accommodation stability: When you are living on rent, you depend on your landlord for your accommodation situation. “If the landlord decides to sell the property or hike the rent to an amount that is untenable for you, you will have to move out,” said Shetty.
