Maharashtra government reinstate stamp duty to 5 percent
Whether to buy or rent a house is one question that runs through most people's minds when they have to take this financial leap While many dream to buy a house, buying a property just isn't for everyone. With the current Covid-19 situation builders have come up with several schemes on their unsold inventories, while the government has come up with Pradhan Mantri Awas Yojana which aims to provide affordable housing to the people, the banks have cut down their interest rates. There are several factors one needs to consider before you buy or rent a house.
Buying a house
Building an asset- The real estate property becomes your asset when you buy it, it's like a long-term investment. You have the authority to make any changes in your property as you wish and you are spending for your own house when making changes unlike a property on rent.
Capital Gains-You own the house so you can sell it in the future for a higher price and gain long-term or short-term capital gains while you also have several tax benefits when you buy a home.
No landlord- You are in control of the decisions you make in your house. You can renovate or repair your house without the need to take any permission.
No uncertainty- As you own the house there is no uncertainty of unfortunate termination of the agreement.
Down Payment- You need to pay at least 20% of the house value upfront. With the current market prices, 20% is a lot if you are a salaried person, it can dry up your savings.
Stamp duty and registration- Stamp duty and registration charges are currently at 5% which needs to be paid when you buy an apartment to the government. This cost is to be borne by the buyer.
Fixing expenses: If anything breaks or needs to be fixed in your house, you are supposed to get it repaired at your own expense unlike in a rented property where the landlord is supposed to get it fixed.
Monthly EMI and interest- You need to pay a huge amount of EMI every month and interest on the loan amount anywhere between 7%-9% per year for the loan till you repay it completely. The total interest amount you pay over the life of a loan can be close to your total loan amount.
No scope for relocation- With the uncertainty of jobs in the current market, paying the EMI can also be an issue in the future. If one needs to relocate due to a job or any other reason your money will be tied to the property plus you'd have to rent a new home if you have to relocate.
Monthly/Yearly Charges- Several expenses that you'd have to pay monthly/ yearly are property tax and water tax to the government and building maintenance charge to your building every month. These charges are to be paid by the homeowners.
Renting a house
Freedom to move out- The biggest advantage of living on rent is the freedom to move out. If you feel like moving out of your current rented property you can leave it after your initial lock-in period. You can downsize to a different rented property if you cannot financially afford your current space.
Repair costs- You have no responsibility for maintaining the rented area. You can tell your landlord, and the landlord will do all the repairs and maintenance for you if anything breaks down. Plus if you tend to travel a lot because of your job you don't need to worry about the maintenance.
Lower fixed Expense- Renting is cheaper than buying and you know how much expense you will bear at the end of the month. You will have better savings as you won't have to pay downpayment like you do while purchasing a house. Also, you can claim tax benefits on your House Rent Allowance (HRA) if you are a salaried person.
Landlords can evict you anytime- You will be living at the mercy of the landlord, if they feel like selling the house you will have to move out.
Cannot make any changes- When you rent a house you can't make any changes to the house unless you have the landlord's permission. If you alter anything in the house the landlord can deduct charges from your deposit.
Rules by the landlord- There are several rules and obligations in the agreement set by the landlord like no pets allowed or no nonveg food is to be cooked inside the premises and no sub-leasing the property, etc and you need to follow these rules unlike when you own the property you don't have to worry about these rules.
Not an asset- Paying rent every month is a living expense without getting a physical asset for yourself. Plus your rent will increase by 5%-10% every year.
Moving costs- You incur moving costs every time you move from one property to another. You will not only have to pay the movers but will also need to rent a vehicle.
The overall cost of homeownership tends to be higher than the overall cost of renting but you make a physical asset for yourself when you buy your dream home. There might be many pros and cons in buying or renting a house but the decision to buy or rent a house completely depends on one's financial situation and requirements.
For more information on renting or buying an apartment please refer to our Rent or Buying Guide:
Rent guide- https://www.thepropertist.com/real-estate-news-and-articles/rent-guide
Buying guide- https://www.thepropertist.com/real-estate-news-and-articles/buying-guide