TO RENT OR TO BUY?

September 20th, 2009 by Ravi Matah | Posted in Life   No Comments »
Email this Email  |  Print This Post Print This Post   |  

In this time of recession, the real estate market bubble has burst. Gone are the days when people used to invest some amount in plots, houses or flats and reaped a fairly good harvest in a short span of six months or a year.

In India, today there are no buyers available. At the same time the sellers are not reducing the price of the property they are holding, hoping against hope that the prices would one day rise. But the prices have not risen in the past two years.

The concept  of ‘own-sweet-home’ is now no longer in operation. When there are no buyers in the market – then what are all the people doing?  I asked a friend who promptly replied “Compared to buying – renting is cheap”. Mathematically, a smart move, I think.

Another one said that the value of his house has considerably gone down and the present  value is even less than the balance amount plus interest he owes to the bank and finds paying the EMIs very difficult in view of the rise in prices of essential commodities. He is thinking of disposing his house and moving to a rented accommodation, but the buyers are not forthcoming.

For the last ten years or so, people had minted money in the sale/purchase of real estate.  But suddenly everything crashed a couple of years ago, including the stocks. Since the housing market has crashed, the rental housing market has remained relatively stable. It is always easy to give reasons as to whether owning or renting is better, but someone suggested that owning is always better.

So far as mathematics is concerned, I think that owning or renting is almost the same in actual financial terms in the long run. A person buys a house by spending his life times savings, left after settling his kids, after he manages to furnish it properly, he is left with peanuts. The debatable  point is that if he invests all his savings properly and gets appropriate returns on his investments, won’t renting  appear  to be a better alternative?  Is it wise to put all your money tied up in one asset? Thus the question is -‘either you have a million in bank OR own a house’? You can’t have the cake and eat it too!!!

As per news appearing in the media, this is a better time for buyers to purchase property in US. Ever since the recession set in, home owners have not been able to repay their bank loans and are opting for foreclosures. Most of the houses are being auctioned by the lending institutions. Here in India, it is still difficult for people to buy a house as even the cost of flats is not going down, the minimun price being  2,500,000/- rupees, comprising of three bedroom, living room  and kitchen, (depending on the location of the property). If you need to park your car also, you need to shell out something  more. In U.S. the starting price of a condominium will be around $200,000/-, (depending again on the location of the property).

There are other considerations also in buying a house, besides the financial aspect. First problem in a rented accomodation is that the home owner can always ask the tennant to vacate his premises at the end of the lease period even if the tenant would like to extend the lease. The Courts in India are full of cases wherein owners are seeking eviction of their premises from their tennants. And then you have to move to another rental place and the situation might recur after 2 or 3 years again. To avoid this complication it is always better to own a house.

It is also a fact that a person enjoys living in his own house without worrying about what the children are doing or whether they are causing any damage to the building or spoiling the carpet. The element of satisfaction is always there, that this is your own house and nobody can ask you to leave. If at all you have decided to buy a house, buy it with your savings plus a minimum loan which you should be able to repay in the foreseeable future, say five to ten years and not to pass on the liability to the next generation.

Either way, whatever you do, you should enjoy life to the fullest; howsoever or where-ever you live.

To conclude this is the famous quote ………AND WISE MEN LIVE IN IT.

Tags: , , , , , ,

Leave a Reply