How much money would a professional need for buying a home compared to taking a house on rent? Would it be prudent for professionals to think about staying in a rented house rather than put in a major part of the monthly income into EMIs? Maybe the money reserved for paying rent can be utilised for EMIs that would help you own a home?
At what stage of one’s earning can one think of a huge investment, or is it wise for young professionals to take it easy and stay in rented houses for a while, before thinking of getting stuck with deep financial commitments?
Several such questions that bog the minds of young professionals are answered in a rather interesting survey-cum-response-oriented study by ArthaYantra.com, a personal finance service company, in its exclusive research on the real estate market in the Bangalore region.
The company officials explain that the research aims to provide a quantitative and hence merit-based answer to the question of ‘buying vs. renting a home’ and further analyses the cost associated with owning and renting a house across eight localities in Bangalore — Bellary Road, Hosur Road, Indiranagar, Kanakapura Road, Mysore Road, Old Madras Road, Tumkur Road and Whitefield.
Says Nitin B. Vyakaranam, CEO, ArthaYantra, “In order to create an objective measurement metric, we developed a proprietary composite score ‘ArthaYantra Buy vs. Rent Score’ (ABRS). It not only aids in taking a decision but also explains the affordability factor that needs to be computed. Based on this one can understand the trends that help one buy or take a house on rent in the city.”
The study and survey in ABRS answers these questions by considering three important factors: rental value, property price and gross income.
Mr. Vyakaranam adds, “To ensure that we bring objectivity to the consumer’s decision making, we have added the ABRS calculator to our personal finance platform Arthos which is freely available on our website. One can find out how owning or renting a house is going to impact his/her overall personal finance and whether a person should buy or rent.”
The Bangalore city index hasn’t recorded any rise or decline. The average prices of the city reflect the 2007 scenario. The real estate market in Hosur Road and Whitefield have outperformed the city’s average; while Hosur Road recorded the highest rise in the index value by 106 per cent, Whitefield saw a 29 per cent rise.
* With respect to property cost vs. rental value, “Across these eight localities, the anomaly of the property values is not being translated to corresponding rental values. Mysore Road stands out to be the most affordable place to buy; while Tumkur Road stands out to be the most affordable place to rent. Indiranagar stands out to be the least affordable place in both scenarios.
* With respect to the required corpus for down payment, considering the average property prices, a professional can afford buying in Mysore Road in three years. In order to own a house in Bellary Road, Hosur Road, Whitefield, Tumkur Road and Kanakapura Road a professional has to save for four years. A professional will need to save for five years in order to afford a house around Old Madras Road.
* With respect to area cost, the average square feet per lakh determines the amount you need to pay. At 6.67 sq. ft per lakh, Indiranagar is the costliest locality while Mysore Road is the cheapest, offering a space of 33.33 sq. ft.