The perception of settling down has always been allied with buying a house. And, coronavirus-caused Covid-19 pandemic has ironically inched people closer to wanting to own a home. The sense of security and pride in home ownership is unparalleled. That compared with the burden of paying rent every month certainly makes buying a much more appealing option. But how/when does one know the right time for buying a property is really the crux of the matter. Owning a house is a wonderful proposition but it strongly hinges on financial readiness of the buyer. Saurabh Garg, Co-founder and Chief Business Officer of NoBroker.com, explains EMI Vs Rent options and which is the best option for home seekers:-
Prospective buyer’s perspective
Buying a home is every Indian’s dream. Millennials are increasingly inquiring about homeownership especially now that they are 6 months deep into the “work from home” environment. NoBroker data indicates that over 65% tenants are looking to buy a home within the next 3 months.
The shift in interest can be attributed to multiple favorable reasons. One, people can get loans at record-low interest rates. Thanks to RBI for reducing the repo rate, which has resulted in home loan rates dropping to sub-7% levels, which otherwise was in the range of 8-9% a year ago.
Two, developers are selling their unsold units at a much lower price at the moment in order to ensure business continuity. Buyers can thus go for a wide array of options within their budget (especially the ready-to-move-in properties) where they can just shift and start living instead of waiting for months that usually happens in case of under construction projects.
Further, the pandemic has also changed the mindsets of people about owning a home. While it was a luxury a few years back, it has now become a necessity in the current times.
Another factor that makes this time ideal for home buying is the PMAY deadline extension. Yes, the government has further extended the deadline for availing this lucrative benefit another year. It means families earning an annual income between INR 6-18 lacs can avail an interest subsidy of up to INR 2.38 lacs till March 31, 2021. It’s good news for first-time buyers and will give them massive relief in terms of financial stress.
However, the amount of EMI that one would pay monthly on a dream house is way more than the monthly rent, due to variables like size, amenities, location, etc. Moreover, EMIs may saddle you with high interest payments on the loan, and you might sometimes have to compromise on the quality of life. In a situation with 20% down payment and 80% loan, you will realize that you have ended up paying more interest to the bank than the cost of the loan itself.
Simply put, living in a rented apartment doesn’t overburden you with a higher liability of paying EMI. On top of that, you always have a choice to change locations and shift to an area that is suitable for you in terms of distance from the office, hospitals, malls, etc. Also, you will be able to afford to live in high-value apartments at comparatively low rents, and hence renting naturally becomes a preferable choice, until a certain point.