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“Renting VS Buying” Home | Agrawal Builders Bhopal

When it comes to find a long term accommodation, we always consider two factors which make better sense – Living in a rented house or buying a property. People always think that rental home costs less in comparison to owning a home. Although, every individual dream of owning a home but due to sky rocketing prices in past have led people to opt for renting instead of buying.

Also if any individual is certain about his future, certain about the city in which he will stay and has funds for down payment it is highly recommendable that he owns his own house.

Advantages of home ownership over renting accommodation:

  • It forces savings in the form of EMI payments which people in a rented house would spend.
  • It brings sense of pride and security in home ownership.
  • Value of home will appreciate over time and if you sell it you can earn a huge profit off the sale.
  • Owing a house brings greater freedom without any restrictions of landlord.
  • Rentals may seem cheaper compared to EMI in short run but in long run it is higher than house cost and rental cost cannot be recovered.
  • Also there is no danger of landlord who can anytime tell you to vacant the house or restrict the number of years a tenant can occupy.

 

Example
Case 1: 
Living on rent

Per month rent – 20,000/-. Appreciation per annum 5%. Expected rent after20 years – 40,000/- per month. Expected rent after 40 years – 80,000/-per month.
Amount paid in 40 years: 2.9 Crores.


Case 2: 
Owing a House

Assumed home loan amount: Rs.40Lacs. Tenure: 20 years. Interest rate: 8.3%. EMI: 34200/-

Total amount paid in 20 years: Rs 82Lacs.

Rent amount saved by a home owner who lives for 40 years (excess amount paid by tenant in last 20 years) Rs 2.1 Crores.

 

Therefore, cost of living in a rental property will be much higher than living in one’s own home.

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