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Why It Is Not Wise To Buy A House In India
Total Articles: 5
There was once a time when investing in real estate was believed to be the safest and most reliable way to channel one’s lifelong savings. After all, what could be more important than the permanence of a roof over one’s head? Except, that time is long gone. Technology has changed our lives almost overnight, and nothing—not even our career and lifestyle choices—is unaffected by the revolution. The world is truly flat, and we’re on our way to becoming global citizens. With that in mind, why would you bog yourself down with a hefty home loan (for a house that you will probably never live in) that takes decades to repay? But that’s not it—there are many more reasons for why it’s no longer wise to buy a house in India.
While the enticing dip in the property prices and reforms such as RERA safeguarding consumer rights and promising transparency in property transactions might make you think otherwise, rentals are the (only) way forward when it comes to the housing sector, and here’s why.
1. Restricted Mobility: Buying a house ties you down in more ways than one. Speaking strictly in terms of location, if you happen to change jobs and your new workplace is at the other end of the city, your daily commute to work could turn into a nightmare. Of course, moving out of the city and finding new accommodation is an even greater challenge when you already have a house to maintain and pay for in a different location.
2. Debt to Income Ratio: In order to secure a good home loan, your debt to income ratio should ideally be 50%. This means that your monthly income should be a sizable one to begin with, and then you must set aside a large portion of it every month to pay for the house. Not only is that a struggle in itself, but having a home loan to pay off the next decade or two of your professional life can restrict you from enjoying the kind of lifestyle that you really desire and from putting your money into many other financially viable investments.
3. Additional Expenses: At first glance, it may seem like you’re saving on all the monthly rental expense when you buy a home. But purchasing a home means incurring multiple different expenses. Monthly loan installments (EMIs) aside, you’ll also be paying the monthly maintenance fee (which is often higher than the rental you have been paying) and many other kinds of expenses such as insurance, repairs and property tax levied upon purchase.
4. Depreciating Resale Value: Investing in an apartment as opposed to buying an independent home on a plot of land is never a financially viable prospect. The apartment, which is situated with a residential complex, is subject to wear and tear over the years (about which you can do very little) and therefore the resale value will begin to depreciate after a while. On the other hand, buying an independent home is a major financial investment, which can be an arduous undertaking for most young professionals.
5. Poor Returns on Investment: Property prices have risen very poorly, if at all, in the recent years. The growth rates offered by other forms of investment, such as equity, fixed income and gold, are more promising. Moreover, real estate investment does not offer the homebuyer any liquidity, thereby thoroughly restricting your financial options for as long as you’re repaying the home loan.
Renting a home offers numerous advantages over buying one. By opting for a rental, you ensure a lifetime of flexibility for yourself—both in terms of living preferences and your career. Moreover, the money you save by paying the monthly rent (as opposed to the EMI and other additional expenses upon purchase) can be allowed to grow in many more viable forms of financial investment. To make a case for rentals simply in terms of numbers, the EMI that you will have to pay for a home you own (over a period of 20 years) is typically 3.5 times the monthly rental you will pay for the same house. That’s a lot of time and money lost for a home that actually binds you to one place and in one job for a long, long time. Buying a house in India no longer makes much sense, and the case for rentals is a clear and resounding one.
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