Should you buy or rent a house?

The Arthayantra Buy Vs Rent Report 2019 tracks the real estate trends in 12 cities across India to help you understand which are the places where you can buy a house and where it makes more financial sense to live on rent.

Assumptions

• Price and rent are calculated for a ready-to-occupy 1,000 sqft residential property
• Baseline gross annual income is considered to be Rs 8 lakh
• Initial down payment amount equals 20% of the house price
• Tenure for home loan is considered to be 15 years
• Home loan lending rate is considered to be 8.55% per annum
• Average savings rate to buy a house is 25% of one's annual income
• Monthly EMI to be paid is equal to 50% of monthly take home salary
• Property tax equals 1.5% of property value
• Property appreciation not considered for EMI & down payment calculations
• Rental security deposit varies from city to city

Property prices and rents have increased across cities
The key factor while deciding whether to buy or rent is the cost vis-a-vis the rental value. While property prices spiked by 11.59% over the past year, rents increased by 9.79%.

Who can buy and who should rent
The income of the family will determine whether it can afford to rent a house, buy or remain neutral, that is stay on rent even though it can afford to buy. It will also help calculate how many years a household earning Rs 8 lakh per annum has to save to accumulate the down payment.

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Most affordable cities to buy a house

1. Indore
2. Jaipur
3. Ahmedabad
4. Lucknow
5. Kochi
6. Hyderabad
7. Kolkata
8. Bengaluru
9. Pune
10. Chennai
11. Delhi
12. Mumbai

Most affordable cities to rent a house

1. Indore
2. Lucknow
3. Jaipur
4. Kochi
5. Ahmedabad
6. Hyderabad
7. Kolkata
8. Chennai
9. Pune
10. Bengaluru
11. Delhi
12. Mumbai

Urgency-to-buy (UTB) ranking
This ranking enables people to decide whether to buy or rent. The UTB ratio shows whether rental yields are in line with property prices.

The average monthly cost of renting is derived from the sum of rents and maintenance costs whereas monthly cost of buying is calculated by adding maintenance costs to EMI. A high ratio indicates buying as the best option and a lower ratio points towards renting as the best option.

SOURCE: Arthayantra Buy Vs Rent Report 2019