Buying or renting a house in metro cities like Chennai, Bangalore, Hyderabad etc, which is preferred, is the essence of this post. In developing countries like India, the property prices are artificially kept higher for a longer term, but it is the rental which shows the exact demand of the property. It is better to be cautious and prudent, before buying a home, because buying a first house is every salaried man’s dream, one wrong step will lead to huge debt and ill-liquid asset.
Till few years ago, buying a house and paying EMI is considered as an intelligent move, but the strategy now, no longer holds good. There was a recent report which says, buying a property in Hyderabad, Ahmedabad and Kolkatta is better than renting, due to the prevailing marketing prices. Hyderabad seems to be the most affordable metro city for home buyers and Delhi is the least preferred city. Off all the metros, Chennai stands 6th in terms of afford-ability by home buyers.
Below are some of the points, you can think of, before taking a decision
1) Price to Rent Ratio – This is a tool used in developed countries to decide whether to buy or rent. Let the price of the property be X, and the total annual rent you are quoted for a year is Y, then calculate X/Y. If the value comes less than 15, its advisable to buy the property, else better to rent it. In Mumbai, average rent for 1000stft house/ flat is 33k per month, but if you want to buy, it costs 2Crores. This amount is definitely an out of reach for common man to buy a property in Mumbai.
Lets see how much costs, to buy a 1000 sqft house in different cities,
Chennai – 75 Lakhs / Pune – 64 Lakhs / Bengaluru – 60 Lakhs / Kolkatta – 55 Lakhs / Ahmedabad – 39 Lakhs / Hyderabad – 34 Lakhs
2) If you have surplus money to invest buy the house, irrespective of Price to Rent ratio. If you are going for bank funding, make sure, you contribute 50% of the property price as down payment. This will keep your life less stressed and enjoy peaceful years. In my office, I have seen many of my friends houses, bought for 1 crore and more, but they don’t have basic furniture in. What is the point of buying a house with that value? So, live a simple life, save for the future in other instruments.
3) Since real estate properties involve huge capital, to dispose, choose a place that has basic civic infrastructure, schools, hospitals and road/ train connectivity. You can always quote a premium and which sells off fast.
There is a good link, which i saw, will be useful for you, pls take a look.
http://www.magicbricks.com/advice/buy-rent-calculator-financial-advice
Hope this helps!
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