Saurabh is a working professional of an MNC in Gurgaon from last 2 years and he stays here with his family, a wife and two children. His wife is considering a change of lifestyle for everyone in the family – one of the changes they are thinking about is whether to buy a house or to keep living on rent. This is a major financial and lifestyle changing commitment for them. The thought of owning a house is always associated with settling down in one place and defining your lifestyle from the way of living.
Saurabh and his wife are talking over whether to buy or to rent out as it’s a matter of choice, affordability and lifestyle.
In this blog, we will help Saurabh’s family and yours to analyze both the options, renting and owning a house, along with a few important questions that first time home buyers ask – Till when should one live on rent? How can one build a corpus to buy a house? And, when is the right time to buy your own?
The most common rationale that is given by our families, friends or bank managers/financial consultants is “Pay the EMIs Instead of Paying Monthly Rent and Own the House”. This argument is completely logical and has convinced most of the first time home buyers to purchase the property.
Let’s simply break the logic – the monthly rents will keep on increasing at an yearly pace and the money is going out of your pocket. But on the other hand, if you buy a house (flat/apartment/independent house) the property value will increase over time which is profit for you at the equal monthly EMI pace for a fixed duration. As a result, you will own the property and it will keep on making money for you at an appreciating rate. Let us explain with the story of Saurabh:
Saurabh currently is staying on rent in a 2BHK apartment in Gurgaon’s prime location which is an hour from his office. He is paying Rs. 40,000 as monthly rent which is going to increase by 10% yearly, in next 3 months and it will be Rs. 44,000. Here, his family’s lifestyle is getting impacted because most of the income from the source is going into rent on a monthly basis. Hence, his family members are not able to live as per the standard of life they want as everything includes additional charges – Club house charges, gym charges, kid’s sports classes and more.
|Particulars||Calculations (Monthly)||Calculations (Yearly)|
|Monthly Rental Charges for 1st year||Rs. 40,000||Rs. 4,80,000|
|Yearly Rental Increment Rate||10%|
|3rd Year Rental Charges||Rs. 48,400||Rs. 5,80,800|
|5th Year Rental Charges||Rs. 58,564||Rs. 7,02,768|
|7th Year Rental Charges||Rs. 70, 862||Rs. 8,50,344|
|10th Year Rental Charges||Rs. 94,317||Rs. 11,31,804|
Now, if you compare the owned apartment in the hotcake location near Gurgaon – Bhiwadi which is just 45 mins away from Saurabh’s office. The cost of the property is Rs. 36,50,000 approximately and is available at 20% down payment (Rs. 7,30,000 as total of unit cost). He takes a home loan from HDFC Bank for the remaining amount at an interest rate of 6.70% on the remaining amount.
|Total 2BHK property price in Bhiwadi||Rs. 36,50,000|
|Initial Down payment of 20%||Rs. 7,30,000|
|Remaining Amount (Home Loan Principal Amount)||Rs. 29,20,000|
|Home Loan Interest on Principal Amount at 6.70%||Rs. 12,31,280|
|Monthly EMI on HDFC Home Loan for 10 years||Rs. 28,670|
|Total Payable Amount (Principal + Interest)||Rs. 45,16,280|
If Saurabh and his family continue to stay in a rented apartment for 3, 5, 7 or 10 years, they will be spending more than the EMI cost on the home loan. Moreover, they will own the property as an asset. The saved amount on the EMIs can be used to improve the lifestyle of the family on a monthly basis.
Most of us don’t calculate the finances before buying a home. People decide to take a bigger loan to buy a smaller home in the city which is quite expensive on their pockets and they will end up compromising on lifestyle quotient. Instead, smart people like Saurabh before buying a home should –
Knowing your finances will help you understand your budget. Once you know your buying power, you can research the developing areas near your work place. Like Saurabh’s office is located in Gurgaon and he stays an hour away and on top of it is the famous traffic of Gurgaon of 30-45 mins. So he can look for properties in Bhiwadi which is 45 mins away from Gurgaon and have less traffic congestion on the road to save on time, as we all know it is money!
Bhiwadi as a location is a rapid developing area by the government near Delhi/NCR. The property prices in Bhiwadi have skyrocketed over time due to the infrastructure initiatives such as RRTS, industrial setups and commercial spaces coming in. For lifestyle upliftment and socializing of people, a lot of shopping malls with reputed brands are available in the area along with renowned schools for children. So with all of these checkpoints, Saurabh and his family won’t have to compromise at any point nor will you have to.
Ashiana, Ashiana Housing build homes. Homes surrounded by vast green spaces and fresh breeze. Homes cocooned in secured gated complexes. Homes where futures are forged and there are opportunities to grow. And Homes in environments brimming with healthy activity, trust and respect. At heart, we build communities with care.
Other posts by Ashiana
Join 1000+ of fellow readers. Get expert real estate knowledge straight to your inbox absolutely free. Just enter your email address below.