5 Reasons For Renters To Turn Property Buyers
Home ownership is still a dream for millions while renting is a logical option many opt for. While many who rent are temporary residents, but, factors like unaffordability and skyrocketing land prices have also been driving people's decisions to opt for homes on rent. In cities like Delhi, Mumbai and other metro cities paying monthly rent is considered to be much easier than buying an expensive house and later paying hefty equated monthly installments (EMIs).
Growth of affordable homes
Having attained the infrastructure status, India's affordable housing segment is set for tremendous growth in the coming days. Central government's initiative, Housing for All by 2022, has been accompanied by other initiatives like redefining of EWS/LIG (Economically Weaker Section/Low-Income Group) categories, interest subvention schemes and incentives to private players. This will be instrumental in encouraging the target tenant-class towards home-ownership.
Attractive home-loan lending rates
Having garnered low-cost deposits after the government's demonetisation drive on November 8, several banks and housing finance companies have reduced home loan lending rates. Leading banks like State Bank of India (SBI), Punjab National Bank (PNB), Union Bank of India and IDBI have cut home-loan lending rates by 90 basis points (bps).
The government has introduced subsidised loan schemes for those looking to buy home under the Pradhan Mantri Awas Yojana (PMAY) Scheme. The Credit Linked Subsidy Scheme for Middle Income Group (also called CLSS for MIG) will be valid for a period of one year starting January 1, 2017. The PMAY benefits can be availed for those buying a house from any developer, through secondary market or for the construction of a new house.
High rental yields
Owing to the informal nature of the rental market in India, the average rental yield for residential units in the country is quite low, close to two per cent. Rental yield is the ratio of annual rent of the property to the total cost of the property. But some localities in India, like Hyderabad, Chennai, Ahmedabad, Gurgaon, etc. have above average rental yields.
Industry experts suggest it is wiser to buy a property when the monthly rent is more than the EMI on buying a property. So from an investor's perspective, it becomes logical to buy to rent or simply buy for end use for renters.
More power to homebuyers with new regulations
The implementation of RERA (Real Estate Regulatory Act) will keep a check on the activities of the developers and equip buyers with more benefits. For instance, in case of a project delay at developer's end, he would be liable to pay the buyer, the same interest as the EMI which a buyer is paying to a bank.
Sense of stability
Homeownership is advantageous as it gives a sense of security and stability to the owner. After buying a property, the owner can make additions or alterations and rent out the additional structure to earn rental income. Property investments give a steady appreciation. Similarly, rents may rise, but fixed mortgage would not.