Should you buy or rent real estate?

Well when you buy, if you use your own money, the answer could be different. Borrowing changes things.

No, I am not getting into the calculations. When you buy a house, you are buying steel, cement, paint, glass, services of a builder, architect…..right?

YOU ARE BORROWING MONEY TO BUY IT. In economic parlance, you are taking MONEY ON RENT and paying rent for using the money.

When you rent a house, you are renting steel, cement, paint…..right?

So you are just deciding on whether to take these commodities on rent or take money on rent.

If you use your own money, you are NOT TAKING ANYTHING on rent. Nothing.

Anyway my views on this topic are well known. I live in an area where I just saw a flat owner sell off his flat for Rs. 1 crore. He was being offered rents of Rs. 8000 per month for the same. Actually he was getting about Rs. 11,000 per month, and he was paying Rs. 3000 per month to the society. So net he was to get 96,000 Rs. on a house with a market value of Rs. 1 crore…so about 1% per annum was the rental yield. He did not get much appreciation too…so read on…

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  1. Its always better to rent in my opinion.
    Buying means you are actually paying twice the amount of the price of house today.
    And now a days there is not even 5% appreciation in many areas across country. Prices are stagnant since past 3 years. It will start going down in next 2 years if this trend continues.
    Builders are finding very tough to sell inventory and make money out of it to pay back to banks.

  2. Subra, though economics says to rent and not to buy owning a house is emotionally a great comfort.

    Also, unlike as you stated home prices can not be termed volatile as they are not known to depreciate. At the most they can be stagnant (as is the condition prevailing now !!)

    On the other hand you must have the heart to see your investment in direct equity or mutual funds getting halved in no time (as is the present situation for small/mid caps).

    Also, returns from equity should have been considered as on date i. e. returns as on 30-06-2018 for comparison purpose.

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