When looking at residential properties in Pune, Mumbai, or any other city In India, it is important to decide whether you want to buy or rent out the property. Although most people would be more intent on buying a property, it might not always make financial sense. When purchasing a home, there are a lot of hidden costs that should be factored in before making a decision about buying a flat.
Comparing, Buying, and Renting of Apartments on Four Fronts -
A few factors should be considered when making the big financial decision of buying or renting an apartment. For the sake of fairness, consider the following points of comparison for the same property when it is rented or bought. This will help you make a true comparison and a smarter financial decision.
1. Initial Costs: When dealing with property matters, some costs will have to be incurred at the initial stage. These costs will vary depending on whether you’re renting or buying the place.
Buying: This includes the down payment, stamp duty, legal agreements, and other fees. This can be discussed in detail with your lawyer, property law expert, or builder. You can also refer to an earlier post on our blog that can help you calculate your initial costs when buying a residential property.
Renting: This includes all the initial fees you will have to pay including brokerage fee (if using a broker’s services), security deposit, renters’ agreement fees, and 1-2 months’ rent depending on the agreement. Some homeowners might also expect you to paint and furnish the home. Refurbishment and furnishing costs, if any should be factored into the initial cost.
2. Recurring Costs: These costs will be borne by you for the time you rent or have bought the home. Let’s consider that if your electricity and water consumption will be the same in both the homes, they will cancel one another out. Following the same line of thought, other contingency charges can also be rules out of this equation.
Buying: This calculation will change depending on whether you’re buying it live there or for renting purposes. First and foremost, you will have to pay the EMI if any, and the maintenance charges of the cooperative society you belong to. You will also have to factor in home maintenance costs.
Renting: Your recurring costs will include rent and other maintenance costs, if any. Homeowners might also expect you to foot the bill for painting the home at the end of a year, or for any unexpected expenditures like plumbing or electricity problems.
3. Taxes: Different taxes are levied on homeowners and renters. Make sure you discuss the legal aspects of buying and renting a home with a lawyer.
Buying: The money spent on the down payment and EMI will be deducted from your salary, thus reducing your overall tax. Please note that there is a limit on the number of properties one can own to avail this deduction. However, when you rent your apartment, the rent will be taxable.
Renting: Every salaried individual receives a certain sum as HRA (House Rent Allowance). This money will be deducted from your salary on presenting the rent receipts.
4. Duration of Stay: You should also consider the time period of the stay.
Buying & Renting: If you’re planning to move in the near future, it would be better to rent a flat. You can opt for this if your disposable income is very high and you’re looking at a long term investment option.
Both decisions can prove to be sound depending on your particular case. You will need to weigh out the factors before making a decision. It is important to remember that buying a home comes with its usual risks. But the gains could be higher as well. Therefore, careful consideration of the property’s valuation will help you in estimating the growth of the property. You can read about the different parameters that affect the valuation of a property here.
Comparing, Buying, and Renting of Apartments on Four Fronts -
A few factors should be considered when making the big financial decision of buying or renting an apartment. For the sake of fairness, consider the following points of comparison for the same property when it is rented or bought. This will help you make a true comparison and a smarter financial decision.
1. Initial Costs: When dealing with property matters, some costs will have to be incurred at the initial stage. These costs will vary depending on whether you’re renting or buying the place.
Buying: This includes the down payment, stamp duty, legal agreements, and other fees. This can be discussed in detail with your lawyer, property law expert, or builder. You can also refer to an earlier post on our blog that can help you calculate your initial costs when buying a residential property.
Renting: This includes all the initial fees you will have to pay including brokerage fee (if using a broker’s services), security deposit, renters’ agreement fees, and 1-2 months’ rent depending on the agreement. Some homeowners might also expect you to paint and furnish the home. Refurbishment and furnishing costs, if any should be factored into the initial cost.
2. Recurring Costs: These costs will be borne by you for the time you rent or have bought the home. Let’s consider that if your electricity and water consumption will be the same in both the homes, they will cancel one another out. Following the same line of thought, other contingency charges can also be rules out of this equation.
Buying: This calculation will change depending on whether you’re buying it live there or for renting purposes. First and foremost, you will have to pay the EMI if any, and the maintenance charges of the cooperative society you belong to. You will also have to factor in home maintenance costs.
Renting: Your recurring costs will include rent and other maintenance costs, if any. Homeowners might also expect you to foot the bill for painting the home at the end of a year, or for any unexpected expenditures like plumbing or electricity problems.
3. Taxes: Different taxes are levied on homeowners and renters. Make sure you discuss the legal aspects of buying and renting a home with a lawyer.
Buying: The money spent on the down payment and EMI will be deducted from your salary, thus reducing your overall tax. Please note that there is a limit on the number of properties one can own to avail this deduction. However, when you rent your apartment, the rent will be taxable.
Renting: Every salaried individual receives a certain sum as HRA (House Rent Allowance). This money will be deducted from your salary on presenting the rent receipts.
4. Duration of Stay: You should also consider the time period of the stay.
Buying & Renting: If you’re planning to move in the near future, it would be better to rent a flat. You can opt for this if your disposable income is very high and you’re looking at a long term investment option.
Both decisions can prove to be sound depending on your particular case. You will need to weigh out the factors before making a decision. It is important to remember that buying a home comes with its usual risks. But the gains could be higher as well. Therefore, careful consideration of the property’s valuation will help you in estimating the growth of the property. You can read about the different parameters that affect the valuation of a property here.
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