Life is usually fraught with challenges and dilemmas which doesn’t necessarily have an easy answer. One such challenge, especially for individuals residing in the top metros in a coupltry like India, is to decide whether to stay in a rented home or purchase a home of their own. If you too are in this dilemma, then,  you’ll have to take various factors into consideration, and once you have deliberated on the factors you will be able to come to a decision quite easily.

To Buy or To Rent

Let’s see what these factors are that can help you make a decision.

Financial Implications:

Any decision on renting a home or owning one involves finances. When you rent a home, there is cash outflow every month in the form of rent and furthermore, you have to provide a lump sum security deposit. You have to provide for the monthly rent out of your income. On the other hand, if you own a home you will not pay this rent, thus saving the monthly cash outflow. But, this applies if you already own a home or inherited from your parents. If not, you will have to fund the acquisition which involves sourcing the funds through own assets or through a home loan. In such a case, finances play a role almost equally whether your rent or buy a home through a housing loan.      

Financial implications

Investment

If you are salaried individual and in a transferable job, it may not make sense to own homes in the cities where you work. In such a case, it is more prudent to stay in rented homes. However, you can probably plan to invest in a home in a city where you want to spend your retired life. Thus, owning a home offers several important benefits which could include tax benefits besides the pride of owning a home. You can also earn rental income if you rent out your home.

Of course, if you are a non-salaried person owning a business or profession you prefer to stay in a city of your choice and in such a case you are probably better off staying in your own home rather than paying rent.

Investment

Tax Benefits

Both options of renting and owning a home offer tax benefits which can help you to reduce your income tax outflow. If you are a salaried person, you can claim HRA benefit as per provisions of the IT Act (these keep changing as per the budget each year). Similarly, if you have taken a home loan to acquire your home, you can claim income tax benefits under various sections of the IT Act (these also keep changing as per the budget each year).

It is also possible to take advantage of tax benefits and grow your assets by staying in a rented home and rent out your own home if it is acquired through a home loan.

Tax Benefits

Non-financial Considerations

If you are in a rented home, you have to contend with the provisions of your rental agreement which may include an increase in rents, proper maintenance of the home, and possible disruption if the owner wants the home back resulting in frequent home shifting. The plus points are that you can choose a good locality, and you need not run the hassles of paying property tax or complying with any statutory requirements.  Further, if you rent out the home then you may have the issues relating to the collection of rent, paying tax on rental income and performing tasks to meet statutory obligations including the operation of a rental agreement.

The main advantages of owning a home is in the sense of pride you feel and the sense of owning valuable asset which in India appreciates in value with time and the pride in bequeathing a treasured asset to your children.

Thus, each option carries with it its own responsibilities and you have to make up your mind which is better suited to your mindset.

From the foregoing, it is clear that you have to opt for renting or owning based on the situation you are faced with in your personal and professional life. But the beauty of the process is that you can make the best of both worlds by opting to stay in a rented place and take a home loan from a housing finance company or NBFC such as Tata Capital and rent it out to take advantage of both options. Availing a housing loan from Tata Capital is a piece of cake with attractive terms including low-interest rates, higher home loan amount and seamless processing, documentation, choice in repayment and tenure and simple formalities. To know more about Home Loans from Tata Capital, click here.