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The buy vs. rent debate rages on as more and more Indians migrate to urban centres and evaluate their options. While there are sound arguments for and against both options, the question itself is also geography centric. ANAROCK Research data shows that rental values in key micro-markets of the top 7 cities have gone up to a significant 72% between 2021-end and H1 2024, while capital values saw lower growth.

Dr. Prashant Thakur, Regional Director & Head, Research - ANAROCK Group, says, "Data analysis of key micro-markets in the top 7 cities shows that in cities like Bengaluru, Pune, Kolkata and Chennai, average residential rental values rose more than the capital values between 2021-end to H1 2024. However, areas in NCR, MMR and Hyderabad saw the reverse trend – capital values appreciated more than the rental values.

Such data can be a key parameter - though by no means the only one - used to determine whether it is more advantageous to buy a property or opt for renting."

Top markets where rental value growth outpaced capital value appreciation - 2021-end to H1 2024-end

* Bengaluru’s Sarjapur Road saw average monthly rental values increase by 67%, while capital values increased by 54%. At Thannisandra Main Road, avg. rental values rose 56% while capital values appreciated 52%.

* Pune’s Hinjewadi saw rental values appreciate by 52%, while capital values rose just 31%. In Wagholi, rental values growth was 60% while capital values rose by just 30%.

* In Kolkata’s EM Bypass, rental value appreciation was 46%, while capital values growth was just 15%. In Rajarhat, rental value growth was 30% while capital appreciation was 23%.

* Chennai’s Pallavaram recorded rental value growth of 40%, while capital values rose by 18%. At Perambur, rental value growth was 33% while capital appreciation was 18%.

Top markets where capital value appreciation outpaced rental value appreciation - 2021-end to H1 2024-end

Key micro-markets in NCR, MMR and Hyderabad witnessed this trend. For instance:

* NCR’s Sohna Road saw rental values rise 40% in the period, while capital values jumped by 54%. Likewise, Sector-150 in Noida saw rental value growth of 56%, while capital values appreciated by a whopping 126%.

* In MMR’s Chembur, rental growth was 38% while capital appreciation stood at 39%. In Mulund, rental values appreciated by 26% while capital prices rose 36%.

* Hyderabad’s HITECH City and Gachibowli also saw capital appreciation outpace rental values. In HITECH City, rental value growth was 46% and capital appreciation was 59%, while Gachibowli saw rental values rise 50% and capital values by 70%.

Back to the Debate

This data is pertinent but is just one of many factors that guide a rent versus buy decision. Not every individual who migrates to a certain city for job opportunities intends to put down permanent roots there. Others may be drawn to the city's urban ethos and decide to make it their home, while yet others may perceive value in investing in a property there regardless of whether they will settle down there or not.

Other factors that drive such a decision are financial wherewithal, job growth prospects, stage of life, size of family, and personal preferences.

An individual in Bengaluru with a stable job who is paying a monthly rent of INR 50,000 for a standard 2 BHK worth INR 1.2 Cr may grapple with the rent or buy dilemma.

If the individual decides to stay on rent, then:

* One-year payable rent for the individual is INR 50,000 x 12 = INR 6,00000/-

* For next 10 years the total rental outgo + 7% annual rental escalation = approx. INR 83 lakh

* This rental outgo is almost 69% of the total cost of this property - and this is just an expense with no investment value accrued.

"If the individual opts to buy the property via a home loan, has the financial wherewithal to make a 20% down payment and borrows the remaining amount over a 10-year tenure at 9.5% interest rate, such a purchase if definitely profitable," says Dr. Thakur. "Instead of spending a huge amount on rent, the individual can pay monthly EMIs and ultimately own the physical asset after a ten-year period."

This is just one of innumerable situations individuals find themselves in, and investment merit alone does not always play such a big role while weighing the pros and cons of renting versus buying a home.

However, current trends indicate that the security of owning a physical asset cannot be discounted. This trend came strongly to the fore during the coronavirus pandemic, when more Indians - including rent-favouring millennials - took a hard look at what they could fall back on when things go south.

Interestingly, it has not abated since then. Amid a rising aversion to high-risk investments, an increasing number of tenants see rent as an expense, and EMIs as SIPs towards a non-volatile asset.

The sentiment favouring homeownership is also supported by relatively cheaper home loan interest rates currently averaging between 8.75% and 9.5%.

Also, homebuyers can avail of:

* Deduction on principal repayment and stamp duty & registration charges

* Deduction on repayment of interest charges

* A further deduction of INR 50,000 for first-home buyers

* Various additional tax benefits for women

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