Contemplating between buying a house or moving on rent? Makaan.com Buy vs. Rent Index (MBRI) helps you decide
Everyone has an opinion on whether it is better to rent or buy a home in the prevailing market conditions. Often these opinions are based on personal circumstances and often what is better for one person may not be the best solution for someone else. Since you are the one who must decide for yourself, based on what you perceive will work the best for you, it's best to do a little research and soul-searching. But Makaan.com saves you all the hard work as in this analysis we bring all the facts that will help you decide. What comes out clearly according to Makaan.com Buy vs. Rent Index (MBRI) released on Monday 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 July-Sept. 2011 and MBRI for July-Sept. 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 (July-Sept. 2011 Vs July-Sept. 2013)
The national MBRI data for July-Sept. 2013 reflects that renting is preferred over buying and speculating. 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 July-Sept. 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 Indian 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 July-Sept. 2011. In 2011, out of the 31 sub-cities, 19 were either in buying or neutral category; however, in July-Sept. 2013 MBRI, only 8 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 34 indicating that the property prices have increased at a rate that was higher than the rate of growth for rentals. In the July-Sept. 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 July-Sept. 2011 Mumbai Andheri-Dahisar, Mumbai Beyond Thane, Mumbai Harbour and Mumbai South West were in Neutral zone meaning one could have decide to buy here depending on their financial situation.
Ahmedabad – MBRI data has placed the city of Ahmedabad on the rental side for over the two years. Within Ahmedabad city, the MBRI for Ahmedabad North, has jumped 18 points (it has risen from 18 in 2011 to 36 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 31 and 28 respectively.
Delhi NCR – The index for the city of Delhi NCR has moved 10 points further on the rental scale from July-Sept. 2011. The overall city has retained its preference for rental and the argument in favor of rental has got strengthened over the last 2 years. The NCR regions like Faridabad, Noida and Gurgoan that were in the Buying rating in 2011 have moved to neutral and rental zones. However, as compared to the main city of Delhi, the NCR still remains affordable. Home buyers are advised to purchase property in Noida depending up on their financial condition as MBRI for this sub-cities lies between 21 and 25. Among areas that should be preferred for renting, Dwarka takes the lead not only in Delhi NCR both at the National level as well. In Dwarka, the MBRI has jumped the highest in two years, 20 points and here rentals are far cheaper compared with 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 20 to 22 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 18 in July-Sept. 2011 to 25 July-Sept. 2013; thus, making a shift from Buying to the Neutral zone. The current MBRI figure shows the city is suitable for making a conscious investment.
Chennai – The index for Chennai has increased from 18 to 26 from July-Sept. 2011 to July-Sept. 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 4 points 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.
As we are nearing the end of 2013, the residential real estate prices across the country have started to soften. It is yet to be seen whether 2014 will be the same as 2013, will there be higher transactions and more transparency in the system. For now, MBRI suggests that the home seekers should prefer staying on rent.