Rent versus buy: Average rental values increased more than capital values in Bengaluru, Pune, Kolkata and Chennai
Should you rent or buy property? In NCR, MMR and Hyderabad, capital values appreciated more than the rental values, according to data shared by Anarock
In Bengaluru, Pune, Kolkata and Chennai, the average residential rental values rose more than the capital values between 2021-end to H1 2024. But in NCR, MMR and Hyderabad witnessed the reverse trend wherein capital values appreciated more than the rental values, an analysis by Anarock has shown.
Overall, rental values in key micro-markets of the top seven cities have gone up to a significant 72% between 2021-end and H1 2024, while capital values saw lower growth, it showed.
Bengaluru’s Sarjapur Road saw average monthly rental values increase by 67%, while capital values increased by 54%. At Thannisandra Main Road, the average rental values rose 56% while capital values appreciated 52%, it showed.
Pune’s Hinjewadi saw rental values appreciate by 52%, while capital values rose just 31%. In Wagholi, rental values growth was 60% while capital values rose by just 30%, the analysis showed.
In Kolkata’s EM Bypass, rental value appreciation was 46%, while capital values growth was just 15%. In Rajarhat, rental value growth was 30% while capital appreciation was 23%.
Chennai’s Pallavaram recorded rental value growth of 40%, while capital values rose by 18%. At Perambur, rental value growth was 33% while capital appreciation was 18%, the analysis showed.
Housing market in Sohna Road, Gurugram, witnesses 54% increase in capital values, 40% rise in rent since 2022
The top markets where capital value appreciation outpaced rental value appreciation - 2021-end to H1 2024-end included NCR, MMR and Hyderabad.
NCR’s Sohna Road saw rental values rise 40% in the period, while capital values jumped by 54%. Likewise, Sector-150 in Noida saw rental value growth of 56%, while capital values appreciated by a whopping 126%, the analysis showed.
In MMR’s Chembur, rental growth was 38% while capital appreciation stood at 39%. In Mulund, rental values appreciated by 26% while capital prices rose 36%.
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Hyderabad’s HITECH City and Gachibowli also saw capital appreciation outpace rental values. In HITECH City, rental value growth was 46% and capital appreciation was 59%, while Gachibowli saw rental values rise 50% and capital values by 70%, it showed.
Should you buy or rent a property?
Factors that drive the rent or buy decision include financial wherewithal, job growth prospects, stage of life, size of family, and personal preferences.
An individual in Bengaluru with a stable job who is paying a monthly rent of ₹50,000 for a standard 2 BHK worth ₹1.2 crore may grapple with the rent or buy dilemma.
If the individual decides to stay on rent, then one-year payable rent for the individual is ₹6 lakh. For the next 10 years the total rental outgo + 7% annual rental escalation is approximately ₹83 lakh. This rental outgo is almost 69% of the total cost of this property - and this is just an expense with no investment value accrued.
"If the individual opts to buy the property via a home loan, has the financial wherewithal to make a 20% down payment and borrows the remaining amount over a 10-year tenure at 9.5% interest rate, such a purchase is definitely profitable," said Prashant Thakur, regional director and head, research, Anarock Group.
"Instead of spending a huge amount on rent, the individual can pay monthly EMIs and ultimately own the physical asset after a ten-year period," he said.
This is just one of innumerable situations individuals find themselves in, and investment merit alone does not always play such a big role while weighing the pros and cons of renting versus buying a home.
Amid a rising aversion to high-risk investments, an increasing number of tenants see rent as an expense, and EMIs as SIPs towards a non-volatile asset. The sentiment favouring homeownership is also supported by relatively cheaper home loan interest rates currently averaging between 8.75% and 9.5%.
Also, homebuyers can avail of a deduction on principal repayment and stamp duty and registration charges, deduction on repayment of interest charges, a further deduction of ₹50,000 for first-home buyers and various additional tax benefits for women.
"There is a lot to unpack when deciding whether to buy or rent a home, and investment rationale alone will not guide all such decisions," said Thakur. "If and when the quandary arises, it makes sense to be sure of one's personal preferences and prerogatives - and the performance of the market one is considering," he added.