Rent vs buy

Rent vs Buy: Here are 6 Factors To Help Your Evaluate Your Decision

Buying a house versus renting is an age-old debate, especially with the way the real estate industry has been functioning for the past year. It is important to determine the income of the family before you take the first steps towards buying a home. Here are a few points that will make you evaluate your decisions and help you work towards buying a home. Rent vs Buy: here are a few reasons why the latter is a better option.

Buying Is Cheaper Than Renting

Buying a house may be more expensive at first. However, in the long run, it actually helps you save more than when you rent a home in the long run. But you must also play your cards right. We all agree that property prices have spiked by 11.59% in the past year, but we also need to take into consideration the fact that even rent rates have increased by 9.79%. Although you may start at a lower rent rate with time in India, the applicable rate of rent increase every two years is around 10 % for residential properties.

Though rent adds up to more in the long run, buying a home is not cheap. First, you will still have to put in a 5-20% down payment when you buy a home. You will have to look into home loans and work with EMIs on a monthly basis. Eventually, that will eat into your savings but once you’re done with your home loans you need not worry about it anymore. Paying more upfront is better than constantly having to pay. So we see the balance tilt a bit in favor of buying a home here.

Time For Saving Up

You know that 5- 20% down payment you need to look into. Have you looked at options for paying it? We can most definitely help you with that. But eventually, everything that is borrowed from lenders needs to be repaid, so that it does not harm your CIBIL scores or credit scores in any way.

In order to do so, you will be forced to be disciplined about where you spend your money so you can reach your goals. Experts say that being a homeowner makes you more responsible, both financially and on the personal front. It will help young adults and millennials get their act together as dates to pay off your EMIs draw closer.

Personalizing Your Home

Honestly, as a person who rents, you are living in somebody’s home. You need to respect and understand their home. You are subject to petty rules and there are times the ambience doesn’t fit your personality but more of your budget.

When you buy your own real estate property, you have control over things like redecorating, remodeling and making the place your own. If you are one of those dreamers fantasize about customizing your own dream home, being a homeowner is the only way that can happen.

Your Home And You Will Appreciate In Value

The real estate industry may seem to be a bit on the tough side of investments when it comes to appreciation in value. But it is also one you can bet on to increase over time. With good research, you could purchase a home whose value will increase each year that you own it. Though urban cities like Mumbai, Delhi, Bangalore have seen a slow rise in property prices, many other developing ones like Pune, Indore, Lucknow, Hyderabad are also great places to buy your new home with the rise in employment and development of the areas.

Buying a home also increases your net worth. Though you may already invest in SIPs, mutual funds or the stock market, this will add to your credibility financially.

Adds Stability To Your Life

When you buy a home you have taken a huge step towards settling down. You are building a relationship with the people in the community where you’ve bought your home.

Homeowners have a greater sense of stability especially when they settle into their first home. They also add to the stability of the neighborhood. In many areas with high rental properties, it gets hard to know neighbors or trust someone with your mail or pets. If you are looking for stability and a good neighborhood, homeownership is something you should look into.

Adds Security To Your Life

Homeowners do not have to go through an eviction notice from landlords. Your home is yours until you decide what to do with it. If you have an extra room you can even put that up for rent. Being a homeowner means you have a permanent address and will never have to move because of factors not in your control.

In a developing country, it is important to look at affordable cities to live in. However, if you have already set up shop in a city, here is how your city ranks in the rent vs buy debacle.

Affordable cities to buy a house

  • Indore
  • Jaipur
  • Ahmedabad
  • Lucknow
  • Kochi
  • Hyderabad
  • Kolkata
  • Bengaluru
  • Pune
  • Chennai

Affordable cities to rent a house

  • Indore
  • Lucknow
  • Jaipur
  • Kochi
  • Ahmedabad
  • Hyderabad
  • Kolkata
  • Chennai
  • Pune
  • Bengaluru

So if you do decide to buy a new home, let us help you with getting your down payment on track.

5 Financial Investment Decisions You Should Take in Your 20s

A financial investment sounds like an adult step in your life, now that you’ve reached a certain stage of stable income. Millennials all over the world find it hard to save, while in India, we find it hard to spend. You’re probably familiar with the words ‘Saving at an early age is good for your finances beta’, because the habit of saving and investments have been deeply ingrained into our culture.

The question however, that arises here is, ‘Where do I invest these savings?’ While you begin thinking about your financial investment decisions, make sure you don’t invest all your eggs in one basket. They need to be spread out across baskets made of iron, cane, gold and even cement for optimal return on investments.

Charting a financial investment plan is easy but sticking to it is where the game changes. This is where you account for every penny that you spend, so that its on the right track towards giving you a prosperous future.

Equity / Stocks

Stocks aren’t for the risk takers we agree, but what if we asked you to skip spending on a T-shirt that costs Rs 300 (with no returns) and invest in a stock worth that amount? When you watch that stock double in a few months, you’ll thank us! You can take baby steps with SIPs and Mutual funds for starters and then take the big risky moves once you’re confident enough.

Before you make your financial investment in the stock market, you must know that you won’t see your money double instantly. The path to long-term wealth creation is building a diversified portfolio of stocks, bonds and a variety of other assets.

Bonds

Bonds or fixed income investments are basically loans from an investor to a company or government. Bond investors receive periodic payments based on the interest rate at which the bond is sold. A bond is usually tied to a coupon or interest rate that is known at the time of buying and this is where you identify your profit in the long run.

All bonds offered to the public have to be listed on a stock exchange and you can sell them on the stock markets if you need funds before maturity. You make a long-term capital gain (LTCG) if you hold the bonds for at least one year before sale and you also score the benefits of indexation while calculating the LTCG tax!

Fixed Deposits & Recurring Deposits

One of the safest financial investment strategies would include multiple fixed deposits od FDs with different tenures. Fixed deposits are a form of investment where you invest a fixed amount of money for a period at a predetermined interest rate. Your money here is safe and returns are guaranteed with high interest rates, but the only drawback is the inability to withdraw this money before its maturity as compared to other investment instruments.

Recurring deposits on the other hand serve your short-term investment goals where you invest a certain amount of money for a fixed tenure. Interest rates for this kind of a deposit are predetermined and based on the amount and tenure, but the catch here is that you cannot change the monthly deposit amount, nor can you withdraw any part of the investment until the tenure is over.

Gold

Gold is one of the best financial investment tools that will always come in handy. As Indians we cherish the idea of stocking gold because we already know its financial value in times of emergencies. You can buy physical gold in the form of jewellery, coins, gold bars and also own paper gold by using gold exchange traded funds and sovereign gold bonds. There are also gold mutual fund options today that gives you added flexibility towards owning the asset. So the next time you receive gold as a present, preserve it in your locker.

Real Estate / A House

Real Estate is the only commodity in the world that will never depreciate in terms of its value. Investing in a house will give you returns in the from of appreciation (Increase in the housing value) and rent.

In 2017, the rental real estate market was pegged at one crore units and was valued at $22 billion (Rs 1.53 lakh crore). By 2023 its volume is expected to reach 1.8 crore with a valuation of $41 billion (Rs 2.85 lakh crore). Make sure you invest in a locality that is upcoming or in high demand to reap maximum benefits.

While you think about this decision, you’ll have one aching question ‘But What About Down Payment?’ Let our home down payment program take care of that!

An example

With that being said, we’ve come up with a hypothetical situation to give you an idea about your financial investment roadmap:

Name: Rahul Kapoor
Age: 26
Salary: Rs 40,000 PM
Savings: Rs 1,20,000
Wishes to buy a home in 5-6 years

Rahul should begin by investing 50 percent of his income in Mutual Funds. He must ideally invest Rs 12,500 in ELSS funds and Rs 7,500 in non-ELSS funds for five years via SIP, so that he gets a good base amount to purchase his new property. He can invest his savings in Corporate Fixed Deposit with yearly cumulative interest.

SIP investment – Rs 20,000/month
Expected rate of interest – 14 percent
Investment duration – 5 years

Post 5 years, the invested Rs 12 lakhs along with SIP investment’s future value will give him a total of Rs 17.24 lakhs. He now has close to Rs 18.5 lakhs as down payment which can be utilised if the home, he is buying is under Rs 80 lakhs.

Using his own savings, a bit of a contribution from HomeCapital and a home loan on his current salary, Rahul can now own a home in 5 years.