[saubi2299]

Originally Posted by shankar.balan

Please check your rental agreement and/ or consult a competent lawyer.

In that case, cost of lawyers and value of your time spent in handling it should be added up.

[cryptarchy]

This article reads more like an advertisement for mutual funds. Fund houses desperately want general public to put their savings into mutual funds, so that they can charge high management fees.

Coming to the debate of renting vs buying, don’t even think twice before buying if one is looking for place to live. Homes are not an investment but an insurance.

[saubi2299]

Ultimately, it’s all about your risk appetite. Why do people invest in FDs? Because they have heard stories of people losing all of their money in stock market. These extreme cases scare people from entering the stock market.

People are driven by their risk appetite and capital available, and those who prefer owning over renting are mainly driven by 3 factors. 1st is emotional factor, 2nd is fear factor (fear of too much exposure to markets) and 3rd is confidence on real estate (umpteen examples of people making huge money from real estate). Another factor is that home loan emi brings some financial discipline.

Those who prefer renting have confidence on market/MF, are not emotional about owning a house, and are not afraid of putting significant chunk in market.

People like me in government sector, under NPS regime, are not getting salary which corporates are offering. Still we all aspire for a particular lifestyle which makes it difficult to save money and invest in market. My pension (NPS) will anyways be dependent on the returns share market gives over next 30 years. Investment in a home forces me to put some money regularly for emi, and diversifies my asset portfolio. Hence, owning vs renting is not a straightforward decision, just like owning a car vs Ola/uber.

[One]

Originally Posted by VWAllstar

Option 1
Now I am looking at a prospect of a near posession flat in Powai costing me 2.3 CR where the monthly rent is 75K -90K. I have 1.3CR to invest and take 1CR as Home Loan. That 1.3CR would be from selling the current flat in Mumbai. Approx EMI for 20 years at 8.5% would be 86K which means it can be negated against the rent income.
.......

If I sell it and buy a near completion flat (option 1) from a branded real estate (read L&T) then I don't see much of a risk.

Not directly answering your question but you should know a couple of points.
1. A 2BHK L&T flat in Powai has had depreciation over past 7-8 years. So any rent you get will partially offset the loan but there will be no capital appreciation happening, which as an investment opportunity, it is not feasible.
2. "No risk in buying" is offset by the higher entry point of the flat. It is equivalent to to buying equity which is priced high so the chances of potential profit are lesser.

Am not in real estate but looking at previous few years, Mumbai (Proper) has not been an investable market for years due to high entry points (micro projects might be present though which I am not really aware of). Strongly suggest to rethink your options above, feel free to DM in case if any specific queries.

[theabstractmind]

As V Narayan sir put it, the first house should never be a financial return based decision. The peace of mind staying in your own house despite the EMIs, and the peace of mind knowing that you're leaving behind a shelter for the family (on the assumption that an insurance can pay off the loan) in the eventuality of a sudden death, cannot be explained or replaced by the spreadsheets. Ultimately, as one grows old, moving houses no longer becomes an option.

A few things the charts in the opening post are totally an aberration. Firstly, the rent increase of just 5 percent is many a times only on paper. Next, every time one changes a house in Bangalore, you pay an additional month's rent as painting charges. Lastly, the notional loss of earnings on the ten month's rent one pays as security deposit is not accounted.

All in all, financially, renting may still work out. Apart from that, your first owned house, cannot be replaced.

[dsr001]

Job security scenario is very important. If you face issues, you can shift to cheaper rental acco. But you can't easily sell your house if you want to close the loan. Also, if employment shifts to another city, the equation changes reg. benefits.

[sunnysideup_]

If I may ask a few questions to establish a certain point, how many of us who advocate for renting over owning are:
1. Set to inherit a certain amount of property.
2. Owners of farmland, and/or residential land in another place.
It is of my belief that owning property brings a certain peace of mind and stability that other investment models quite can't for the traditional amongst us, even if you can dismiss it as materialistic.

[VWAllstar]

Originally Posted by One

Not directly answering your question but you should know a couple of points.
1. A 2BHK L&T flat in Powai has had depreciation over past 7-8 years. So any rent you get will partially offset the loan but there will be no capital appreciation happening, which as an investment opportunity, it is not feasible.
2. "No risk in buying" is offset by the higher entry point of the flat. It is equivalent to to buying equity which is priced high so the chances of potential profit are lesser.

Am not in real estate but looking at previous few years, Mumbai (Proper) has not been an investable market for years due to high entry points (micro projects might be present though which I am not really aware of). Strongly suggest to rethink your options above, feel free to DM in case if any specific queries.

Valid points. Any report or data which justifies that the entry points are high and there are no/less potential of growth? Real Estate as a whole is always unpredictable. In the last 10 years the prices have been stagnant and there could be a good chance of an upward trend. As you said, it is just like an equity script which can either have higher highs or correct itself to a low.

[ZenMaster]

I am in my late 20s.

Based on what I've seen over my short span in this world, my logic is simple (not based on financial returns).

If I am a salaried person with a decent income, and I'm 80% sure that I would settle down in a particular place, I'd buy a house there.

If there is a high chance, for me to move from there to another place I will do 2 things:

Live in a rented house that is Well Below my means.
And save up/invest for a house that I'll either buy in a future location or in my hometown to where I'll return after retirement.

Therefore neither approach (i.e. Maya vs Tara) is wrong if your end goal is clear i.e. WHERE DO YOU WANT TO SETTLE DOWN.

Most of the people talking financial gymnastics of renting/investing till you die already own multiple homes and are well off, enough to buy their "rented houses" 2x 3x time over.

And after all this renting+investment what are they going to do?........most of them will most probably end up buying a house at a later point of time in their life.

I whole heartedly agree with V.Narayan ji's opinion. Your 1st house should be your HOME as long as you can afford it.
You should either build it or own it, not invest in it. Nobody should be able to kick you out of your personal heaven and put a price on your happiness. Its your safe space that you can always go back to even if its a bit small.

Once you own a second home, you can start calculating ROI.

As a "GULF" kid, who grew up in the middle east, where we are fortunately not burdened buy the cross of showing off wealth that doesn't exist and out-spending Sharmaji next door, we know the power of living below your means.
We weren't RICH growing up, but we are wealthy now.

[how_you_doing]

I stayed on rent for 10 years in multiple flats and recently bought a couple of flats for my family in Bangalore. Here is my experience and learning.

1. You should buy a flat if you can afford it. Don't get into minor calculations like you save a few lakh more while renting. Your flat will give you peace of mind and you can build your life around it. You will form great memories with your family, kids, parents et cetera on which you cannot put money.

2. If you are tight on budget, instead of 3BHK buy a 2BHK and convert it into 3BHK by breaking the walls of some kind of partitioning. Check the videos on YouTube, about how Japanese, Hong Kong, Chinese, and Singapore houses use the vertical space of the flat. I hope more people in India start doing that.

3. Do not rush to buy a flat. You can spend 2-3 years searching for the best property as this is your largest expenditure in life. Take help from others. Learn more about the locality where you want to buy the flat.

4. If you get a good flat, that fits your criteria, don't haggle for a few lakhs, take it immediately. Between getting a great flat and a great deal, always go for a great Flat (the same logic applies to second-hand cars as well).

5. If you are staying in a good flat at a reasonable rent, keep staying in it, and the money that you are saving use it to make more money. But eventually, keep looking for a flat to buy. Be smart and visualize where you will be in the next 3, 5, and 10 years, and plan accordingly. Are you planning to get married, are you planning to have kids, are you planning to bring your parents to your flat, etc a decisions which decide whether to stay on rent or buy a flat.

6. Real State often goes boom and bust in a 7 to 10-year cycle. In India, the Real State will keep going up as long as the population increases and people move up in the social hierarchy/status. People are also moving from joint families to nuclear families and the a huge demand for flats in cities. You will not be able to get the timing right but make sure you don't buy property when you should be selling it and you don't sell property when you should be buying it. 2020 to 2022 was the right time to buy property, now is the time to sell it (at least in Bangalore).

[Zippy_wheels]

I have been mentally on both sides of the fence. Till about 6 years back I was a fierce proponent of living on rent. People who came to advise me to buy a house left questioning their own logic. My logic was based on the factors below: -
1) I saved on the downpayment.
2) I calculated that at my then rent of 15k, if there was increase of 2k per year, even then my rent would reach 25k in 5 years. 25k was sustainable even then so 5 years down the line 25k was fine. Then in 8-10 years when rent became beyond my means I could shift to another area. This way I would complete ~30 years of working life and go back to my home town where I have a house or buy a house in later stages of life.
3) Gave me flexibility to switch cities.
4) I could save the money for future.
5) I wasn't tied to a loan.

I realized later I was fooling myself a bit.
1) I ended up spending a lot of the money I saved. Some crisis or the other tended to come up whenever I was sitting on a pile of cash.
2) I was feeling left out of major society discussions/events since some were "owners only" events.
3) Never could purchase heavy duty house hold items since the first thought was - will it be easy to shift?
4) Was anxious what would happen if I got the kids admitted to a good school and then had to shift.
5) Hated brokers and their shady dealings - for example they would convince owners that they could get higher rent and get owners to vacate the flat. They would constantly come at odd hours to show the flat - for rent or sale. It felt like a big invasion of privacy.

I first ended up buying a property in my home town since I did not have to courage to invest in Pune and pay the astronomical prices and I did not want to shift to a cheaper area. I was convinced that a house in my home town would make sense since that was my base and I would never leave it. It was my backup option.

Two years later covid struck and we were all holed up in our houses. That made me realize that the "area" did not matter much and gave me the courage to accept that I could live without the advantages that a posh area provided. The other constant worry was the owner was retiring and planning to shift to pune so I would have to shift. I was sad that the kids had made friends and we would have to leave everything and move.

When covid ended I started a casual search for an apartment. My criteris were it needed to be new but ready to move - did not want to pay emi and rent at the same time and still live on rent.

Fortunately for me, the stars aligned and I found a builder who had some flats stuck in inventory due to covid and he gave me a good deal. It met all my other criterias and I was just starting to look for schools for the kids so I could home in on a school in this area. As I said everything fell in place.
In one month everything was done and I finally shifted.

I am now a proponent of buying an apartment/house whenever it is the "right time". This right time will be different for different people but, I feel, we should keep our options open and eventually buy one. The fact is our cities are overburdened and overflowing. There will always be a demand for houses and the more you delay the harder it will get to secure a house in an area you like or one that is nearer to your work/kid's school etc.
The EMI goes at the start of the month, and for people like me who are not very financially disciplined, it is better I pay this than end up spending it for some readon or the other.
The thought that I wont have to move is very satisfying.
I can make changes to the house as I wish, and I realized I liked the time and efforts spent in setting up my home exactly like I wanted.
Also there is no concern that my rent will rise. I dont need to get agreements done every 11 months. There is no discussion on how much rent will be increased. No one can call me to enquire about how their house is being kept and what I can do and cant do. I habe a permanent address so I dont need to update address proof all the time.

There are many more benefits. Just jotted down a few.

[SmartCat]

If India had a large reputed company like L&T offering thousands of apartment complexes for rent all over India, then it would have made sense to rent instead of purchase outright. If renting as a business is corporatized, it might offer proper standards, choices and longer tenure duration (say 3 yr/5 yr contract) to the tenants.

Right now, there are too many hassles and uncertainty (duration) in staying in a property on rent.

[jjp@chn]

Originally Posted by Omkar

There’s plenty of debate on this topic already. Especially when people from different generations talk about it. The ideologies are different and so are the approaches towards this specific topic. Here’s an article from Finshots talking about this specifically

Financial literacy is key in such financial decisions, whether it is investment or borrowing and unless the person is aware of how to mitigate the risks or has sound counsel, they shouldn't go forward with either. The calculation assumes that Maya will end up paying the same EMI for 20 years, which is not the ideal choice. However, in reality, most people see an increase in their income over the years which should help them to close the loan ahead of time.

I have found that by either prepaying the home loan in multiple part payments or reducing the tenure by increasing the EMI to the maximum possible helps significantly reduce the amount of interest paid for the home loan. In my view, the sweet spot is to try and close the home loan in 4-6 years, but this will require enormous amount of financial discipline - avoid wasteful spending, save more, increase your income etc. Even if the loan can be closed in 10 years, the person would have saved around 45-50 lakhs in interest and for 6 years, the savings can go up to 80 lakhs.

But then, home purchase is not always a numbers game but involves lot of emotions - more of a heart than a head decision. Similarly, investments with 12% returns are also not very straight forward - it is easy to allow the EMIs to be deducted each month (and end up owning a house that appreciates by the end of the loan tenure) than to put in place a structured investment strategy and execute it every month without fail to achieve the theoretical outcome described in the article.

[Imran.Syed]

India needs big and commercial landlords on a national scale, maybe even a couple of them. The most important thing with such companies IMO is that you pay the rent on time and not be a nuisance to your neighbours, which is not always the case with private and/or small landlords.

Otherwise, I follow this rule: in a HCOL area, I rent, in a low or medium COL area, I would prefer to buy. But it takes a lot of discipiline to invest or be smart with your saved money like Zippy_wheels posted.

[V.Narayan]

One piece on free and unasked for advice I give {and have given on this forum} to young people is that when buying a house to live in go for one notch or half a notch above what you can comfortably afford i.e. stretch so that 10 years later you don't feel uneasy or embarrassed about the locality you live in. For self-respect and being proud of where you live this is important. Better to own a house a little above your standard and a car a little below. At least that is my philosophy.

Originally Posted by jjp@chn

....The calculation assumes that Maya will end up paying the same EMI for 20 years, which is not the ideal choice. However, in reality, most people see an increase in their income over the years which should help them to close the loan ahead of time.
.....Even if the loan can be closed in 10 years, the person would have saved around 45-50 lakhs in interest and for 6 years, the savings can go up to 80 lakhs.

The EMI stays the same in nominal terms but actually decreases in real purchasing power due to inflation. While for most of us our incomes increase over the years both in nominal terms as well as in real purchasing power. That EMI which seemed back breaking at age 28 becomes less draconian at age 35 after that nice promotion you got and by age 40 you are ready, often, to pre-close the loan.

Originally Posted by jjp@chn

Similarly, investments with 12% returns are also not very straight forward - it is easy to allow the EMIs to be deducted each month (and end up owning a house that appreciates by the end of the loan tenure) than to put in place a structured investment strategy and execute it every month without fail to achieve the theoretical outcome described in the article.

Well said. I consider myself reasonably financially savvy and I'd say you have to be in the top 0.1 percentile of discipline gurus to achieve this. And I know I'm not. Life throws so many curved balls at you that burn up money and throw helter-skelter your carefully laid plans of investments. I sometimes think that so called investment advisors who draw up such plans have not tasted the lows of life yet!

Originally Posted by ZenMaster

You should either build it or own it, not invest in it. Nobody should be able to kick you out of your personal heaven and put a price on your happiness. Its your safe space that you can always go back to even if its a bit small.

Wise words from some one so young. By law of averages all of us will face financial and other pressures at more than one point in life - expensive medical bills, death of loved ones, accidents, businesses collapsing, losing you job {and hence min income} and so on. At those points in life when you are low on energy and/or cash it pays to have your own home. You can't comfortably fight other battles life throws at you if you do not have home security.