Renting a property seems attractive and affordable - Makaan.com Buy vs. Rent Index (MBRI)
Gurgaon, June 4, 2013: The days when an Indian could aspire to own a house in their late 20s or early 30s seems to be making way for the times when people will again have to shell out their lifelong savings and still go under a heavy debt in order to acquire the ownership of a house. It still remains to be seen whether the current high property prices will come down in 2013; however, what comes out clearly according to Makaan.com Buy vs. Rent Index (MBRI) released on Tuesday is that the key Indian cities, including Mumbai, Delhi, Bangalore, Ahmedabad, Pune and Chennai have seen a significant shift in sentiment towards renting i.e., at present, the rental property prices in these cities seem attractive and affordable.
A comparison between the MBRI for Jan-March 2011 and MBRI for Jan-March 2013 shows that within two years, key real estate markets have moved from being a place for buying and investing ranking to renting. Home Buying has never been an easy decision especially in the Metros and the present MBRI suggests that the property seekers adopt a “wait and watch” policy anticipating a fall in prices and a drop in home loan interest rate.
Makaan.com Buy vs. Rent Index (MBRI) for top Indian cities / areas (Jan-March 2011 Vs Jan-March 2013)
The national MBRI data for Jan-March 2013 reflects that renting is preferred over buying. Overall a lower MBRI (under or equal to 20) indicates a preference for Buying vs. Renting and a higher MBRI (over 25) indicates a preference for Renting over Buying. MBRI of 21 to 25 is a Neutral zone where the person can take a decision based on his liquidity position. On analyzing the MBRI for Jan-March 2013 for 31 sub-cities in India (see table), it can be observed that cities like Mumbai, Pune, Delhi, Chennai and Ahmedabad are preferred for Renting whereas Bangalore and Hyderabad are in the Neutral zone. In fact, there is no city in India where buying a property is advisable over renting. However, we must clarify that there would be pockets within these cities where Buying would make more sense due to local dynamics. It is interesting to compare the 2013 data with Jan-March 2011. In 2011, out of the 31 sub-cities, 20 were either in buying or neutral category; however, in Jan-March 2013 MBRI only 10 sub-cities fall under the buying or neutral category. Read further to know more regarding MBRI changes on a city basis.
Mumbai – MBRI for the commercial and financial capital of the country, Mumbai has remained on the rental side for over the two years. From 2011 to 2013, the MBRI going from 26 to 32 indicates that the property prices have increased at a rate that was higher than the rate of growth for rentals. In the Jan-March 2013 MBRI, all the sub-cities i.e., Mumbai Andheri-Dahisar, Mumbai South West, Mumbai Beyond Thane, Mumbai Mira Road And Beyond, Mumbai Navi, Mumbai South, Mumbai Thane and Mumbai Harbour appear in the rental zone. In comparison, in Jan-March 2011 Mumbai Beyond Thane, Mumbai Mira Road And Beyond, Mumbai South West and Mumbai Thane were in Neutral zone meaning one could have decided to buy there depending on their financial situation.
Ahmedabad – MBRI data for 2011 placed the city of Ahmedabad in Buying zone (MBRI 19) whereas in 2013 MBRI has grown to 34 making renting a better option. Within Ahmedabad city, the MBRI for Ahmedabad North, has jumped 21 points (it has risen from 20 in 2011 to 41 in 2013) making it more suitable for renting. Similarly, Ahmedabad West and East have seen rise in property prices and MBRI for these areas is 30 and 31 respectively.
Delhi NCR – The index for the city of Delhi NCR has moved 9 points further on the rental scale from Jan-March 2011. The overall city has retained its preference for rental and the argument in favor of rental has strengthened over the last two years. The NCR regions like Noida and Gurgoan that were in the Buying rating in 2011 have moved to neutral and rental zones respectively. However, as compared to the main city of Delhi, the NCR still remains affordable. Home buyers are advised to purchase property in Ghaziabad and Noida depending on their financial condition as MBRI for these sub-cities lies between 21 and 25. Faridabad is a region in Delhi NCR that shows an interesting trend; the region has the same MBRI points for Jan-March 2011 and Jan-March 2013, i.e 19. It remains in the Buying zone and investing in property there is highly recommended. Among areas that should be preferred for renting, Dwarka takes the lead. In Dwarka, the MBRI has jumped the highest in two years, 20 points and there rentals are far cheaper compared to the prevailing property prices.
Bangalore – Bangalore has witnessed the highest IT boom in the country and the same is reflected in the property prices. The index for Bangalore has moved to Neutral zone from Buying zone. The MBRI figure has moved from 18 to 21 over two years. The city that was preferred for buying in 2011 is now suitable for making a conscious investment. Within the city, main pockets like Bangalore Central, Bangalore North and Bangalore West are in the neutral range meaning one can decide to buy or rent based on their financial situation. Areas like Bangalore East and Bangalore South have seen a rise in their respective MBRI points; however, are recommended for buying indicating that it is far more economical to buy a property in these areas than to stay on rent.
Hyderabad –The index for Hyderabad has moved from 25 in Jan-March 2011 to 24 Jan-March 2013 remaining in the neutral zone. The current MBRI figure shows the city is suitable for making a conscious investment. Among the sub cities, Secunderabad shows a fall of 4 MBRI points from 2011 suggesting that the region might be open for investment in the future.
Chennai – The index for Chennai has increased from 17 to 26 from Jan-March 2011 to Jan-March 2013 period respectively. The overall city has drastically moved from Buying to Rental range and property seekers in Chennai are advised to rent a property rather than buying. However, Chennai South still maintains a Neutral zone and property can be bought depending on the financial situation of the seeker.
Pune – The index for the city of Pune has moved 5 point further and has moved to the rental scale after remaining in the neutral zone in 2011. This figure provides a slight indication that the property prices have gone up or there is softening of rentals in the city. Property seekers in Pune have to be a little cautious while making the property purchase as the prices have started increasing.
Like the recent drop in gold prices, the real estate industry can only hope to see a real estate price correction. Furthermore, there is a dire need for a regulatory system in the industry to keep a check so that the end-users can fulfill their dreams of owning a house with manageable debt. For now, MBRI suggests that the home seekers should prefer staying on rent.