Representative Image Rental values across key micro-markets across the top 7 cities have increased by 72% between the end of 2021 and the first half of 2024, while capital values have witnessed lower growth, as more and more Indians migrate to urban centres and evaluate their options, according to the report. Anarock,
cities like BangaloreWhile Pune, Kolkata and Chennai saw average residential rental values increase more than capital values, regions in NCR, MMR and Hyderabad saw the opposite trend – capital values increased more than rental values.
Prashant Thakur, regional director and head of research at Anarock Group, said, “Such data can be an important parameter – though not the only parameter – used to determine whether it is more beneficial to buy a property or rent it.”
“Not everyone who moves to a particular city for job opportunities intends to settle there permanently. Some may be attracted by the urban ethos of the city and decide to make it their home, while others may see value in investing in property there, regardless of whether they settle there or not,” Thakur said.
Other factors influencing such a decision are financial means, job growth prospects, stage of life, family size and personal preferences.
A person with a stable job in Bengaluru who is paying a monthly rent of Rs 50,000 for a standard 2 BHK worth Rs 1.2 crore may be facing the dilemma of rent or buy.
Thakur said, “If a person chooses to buy a property through a home loan, has the financial means to make a 20% down payment and borrows the remaining amount at a 9.5% interest rate over a period of 10 years, such a purchase is definitely profitable. Instead of spending a large sum on rent, one can pay monthly EMIs and eventually own the physical property after a period of ten years.”
However, current trends indicate that the security of owning physical assets cannot be ignored. This trend came to the fore during the coronavirus pandemic, when more Indians – including the younger generation who live on rent – seriously considered how they could survive if things got worse.
Amidst growing aversion to high-risk investments, an increasing number of tenants view rent as an expense, and EMIs in the form of SIPs as a non-volatile asset.
People’s sentiment in favour of buying a house is also supported by relatively affordable home loan interest rates, which currently range between 8.75% and 9.5% on an average.
“There is a lot to consider when deciding whether to buy or rent a home, and investment logic alone should not guide all such decisions,” Thakur said.
