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Renting vs buying a house in India: Pros and cons

Renting vs buying a house in India: Pros and cons

A question that often occurs in the minds of Indian citizens is: Should I rent or buy a home? While there is no fixed answer because it varies based on one’s condition, there are pros and cons of each that must be evaluated before arriving at a decision. Renting doesn’t require large upfront costs, but it also doesn’t help you acquire a long-term asset. Similarly, buying gives you ownership rights, but it doesn’t allow you to move too frequently.

This article explores the concept of buying vs renting a house, enabling you to arrive at an informed decision on: is it better to rent or buy a home.

Renting vs buying a house: The key difference

Renting a house means paying a landlord monthly rent to live in their property without ownership rights. Buying a house, on the other hand, involves purchasing property and gaining complete ownership after paying its full value or through home loan EMIs. Let’s understand the key differences.

BasisRenting a houseBuying a house
OwnershipNo ownership, temporary stayFull ownership after purchase
Upfront costLow, includes security deposit and rentHigh, includes registration, down payment, EMIs
FlexibilityEasy to relocate anytimeDifficult to move, as selling takes time
MaintenanceManaged by the landlordThe owner bears all costs
Long-term valueNo asset creationBuilds equity and long-term wealth
Tax benefitsLimited or noneTax deductions on a home loan
Ideal forYoung couples who need to relocate frequentlyThose who need a long-term stay

Advantages of renting a home

If you often question yourself: Should I rent a home?, take a look at the following advantages of renting a home:

  • Low initial cost: Renting requires only a security deposit and monthly rent, avoiding large upfront expenses like down payment, stamp duty, or registration charges.
  • Flexibility to move: Ideal for people who frequently relocate for work or personal reasons, as tenants can easily change homes without long-term commitment.
  • No maintenance burden: Generally, it is the responsibility of the landlord to handle maintenance costs and major repairs.
  • Freedom from property taxes: Renters do not have to pay annual property taxes or society maintenance fees.
  • Access to better locations: Renting allows individuals to live in prime or expensive areas that may be unaffordable to buy.
  • Easier financial management: Rent is often lower than EMIs. As a result, tenants can manage monthly expenses and also save.
  • Protection from market risks: There is no effect of property market fluctuations or interest rate changes on tenants.
  • Short-term convenience: Renting is suitable for students, professionals, or newly married couples who may not yet be ready for homeownership.
  • No long-term liability: Tenants don’t need to worry about long-term debt or the sale of property when they wish to relocate, upgrade, or downgrade.

Disadvantages of renting a house

The various disadvantages of renting a house are:

  • No ownership benefits: Monthly rent payments do not build any equity or long-term assets for the tenant.
  • Lack of stability: Renters may have to move frequently if landlords increase rent, sell the property, or terminate the agreement.
  • Regular rent hikes: Rent often increases annually, burdening the tenant more without the benefit of ownership.
  • Limited control: Tenants cannot make structural changes, renovations, or significant decor modifications without the landlord’s approval.
  • Uncertain tenure: Lease agreements are typically short-term. As a result, renters are uncertain about where they’ll live for long.
  • No tax benefits: Unlike homeowners, tenants cannot claim tax deductions on rent paid, except under certain allowances for salaried individuals.

Advantages of buying a home

Buyers must understand the advantages of buying a home in India before taking the plunge.

  • Long-term financial stability: Owning a home eliminates the uncertainty of rising rents and provides lifelong security, especially after the loan is fully repaid.
  • Asset and wealth creation: Every EMI paid builds ownership in a tangible asset that typically appreciates over time, helping you accumulate long-term wealth.
  • Appreciation in property value: Real estate often increases in value due to urban development, better infrastructure, and rising demand. It lets you earn significant returns in the long run.
  • Tax benefits: Home buyers can avail deductions on home loan interest under Section 24(b) and principal repayment under Section 80C of the Income Tax Act, reducing overall tax liability.
  • Collateral for loans: Property can be used as security to obtain personal, business, or education loans, improving financial flexibility.
  • Rental income potential: A second home or a portion of your property can be rented out to generate steady passive income.
  • Family security and legacy: A home ensures long-term comfort for your family and can be passed down as a valuable inheritance.

Disadvantages of buying a home

The drawbacks of buying a home are as follows:

  • High upfront costs: Buying a home requires a significant down payment, registration fees, and stamp duty.
  • Long-term financial commitment: A home purchase requires paying monthly installments. It also requires handling property taxes and other expenses.
  • Reduced flexibility: When you own a home, it is difficult to relocate quickly due to the long selling process and market dependency.
  • Market risks: Property values can fluctuate based on economic or location factors, affecting the resale potential of your asset.
  • Liquidity concerns: It is not easy to convert a home into cash quickly. The asset is not easily liquidated.
  • Maintenance expenses: You will have to pay for the repairs and society charges for a home you own.
  • Interest burden: Long-term home loans result in substantial interest payments over time.
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FAQs

Is it cheaper to rent or buy a home in India?

In most Indian cities, renting a home is usually cheaper than buying one, if you take it for the short term. Renters only pay monthly rent and a small deposit, whereas buyers face large upfront costs like down payments, registration fees, and EMIs. However, buying becomes more cost-effective in the long run as property values appreciate and EMIs build ownership equity. The answer also depends on the city. In metros, property prices are higher, whereas in smaller cities, real estate costs are low. Thus, renting is more suited in metros, leaving buying for the smaller cities.

Should I rent or buy a home if I move cities frequently?

If you relocate frequently due to work or lifestyle, renting is a more practical and cost-effective choice. There is no worry of selling property, paying EMIs, or managing vacant homes. Buying, on the other hand, ties you to a location and involves high transaction costs, maintenance expenses, and potential losses if property prices stagnate. Unless you plan to settle in one city for at least 7–10 years, renting helps maintain liquidity, avoid long-term commitments, and reduce the financial strain associated with property ownership.

What are the financial benefits of buying vs renting a house?

Buying a house provides long-term financial stability, asset appreciation, and tax benefits on home loan interest and principal repayments. It helps build equity over time, securing ownership and future wealth creation. Renting, however, offers flexibility and lower upfront costs, allowing savings to be invested elsewhere for potentially higher returns. Renters also avoid property taxes, maintenance charges, and loan interest. Buying is financially more beneficial for long-term residents seeking stability and capital growth, while renting suits those who prioritize mobility, lower risk, and short-term affordability.

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