Buying Vs Renting a home in India - which one is better?
Property seekers in India have a tough choice between Buying Vs Renting a home. This question becomes even more pronounced with increasing capital and rental rates making seekers spend incremental amount. This is a tough decision but is normally taken either relying on a gut feeling or with the guidance of a close relative / friend, leaving a great scope for error. To help home seekers take better and informed decision in this regard, Makaan.com brings to you a robust and reliable tool – Makaan.com Buy Vs Rent Index (MBRI). This Index helps answer the questions based on research & data analysis. The MBRI for period October to December 2011 highlights some interesting findings for top Indian cities / sub-cities. Before you have a look at the MBRI, it is important to understand its interpretation.
How to interpret MBRI?
MBRI of 1-20: This denotes that it is much less expensive to buy a home than to stay on rental, in these cities / sub-cities. Property seekers looking at investing here are advised to buy a property than staying on rentals.
MBRI of 21-25: This denotes that it is relatively more expensive to buy a home than to stay on rental, in these cities / sub-cities. This is a neutral range and property seekers looking at investing here are advised to take the final decision based on their financial situation.
MBRI of 25+: This denotes that it is much more expensive to buy a home than to stay on rental, in these cities / sub-cities. Property seekers looking at investing here are advised to rent a property rather than buying.
MBRI table for India and cities of Mumbai, Pune, Ahmedabad, Delhi NCR, Bangalore, Hyderabad and Chennai is given on the next pages
October to December 2011 Buy Vs Rent analysis for top Indian cities / sub-cities
Buy Vs Rent analysis for Mumbai – The index for the city of Mumbai is at 30 indicating that it is advisable to stay on Rent Vs Buying property. In fact all sub-cities in Mumbai have come in the rental zone during the Oct–Dec’11 period. If one were to analyze the quarterly change, the Index has moved up from 26 in July-Sept’11 to 30 in Oct-Dec’11. This shift towards rental could be attributed to the hardening of overall property prices which makes buying of property difficult. This phenomenon can also be attributed to stable rental rates in the city. The neutral areas in last quarter: Andheri-Dahisar, Beyond Thane, Mumbai Harbour and South-West Mumbai have shifted to the rent side contributing to the overall shift to rental for the city.
Buy Vs Rent analysis for Pune – The index for the city of Pune has remained stable at 25 from July-Sept’11 to Oct-Dec’11 period. The city of Pune hence remains in the neutral range. This stability in MBRI can be attributed to hardening of property prices for both buying and renting. Property seekers in Pune can decide to buy or rent based on their financial situation.
Coverage - Each city is divided in sub-cities (micro-markets) and micro-markets into localities. Prices of properties are obtained across micro-markets through listings on makaan.com as well as makaan.com’s nationwide sales force.
Database - The current Index comes from 32 micro-markets across the above cities. The Index is based on minimum database size of 20,000 data points every month.
New & Resale properties - The MBRI database includes a good representation of new as well as resale properties. Most reports on the property sector today are based on new developments, whereas actually new properties are relatively small % of the supply with resale being the majority of supply.
Index algorithm - The Index is calculated quarter-on-quarter for each of the above cities & sub-cities. It is a derived index using an advanced algorithm which factors in the average value of properties available for sale and rent.
Selection of cities for MBRI
Coverage - The MBRI covers Ahmedabad, Bangalore, Chennai, Delhi/NCR, Hyderabad, Mumbai and Pune. Other cities may be added in subsequent issues. These cities account for over 80% of the Indian Real Estate market.
Factors that have been taken into consideration while selecting the cities:
Population – The real estate sector is dependent on the demand of houses, which in turn is dependent on the population. Populous and ever growing urban agglomerates like Mumbai and NCR have an ever growing demand for housing.
Economic Importance – Cities which are hubs of certain industries have constant influx immigrants from across the country, which also creates a strong demand for housing – beyond the needs of the resident populations – e.g. Bangalore, Pune. Hence such cities have also been included.