High property prices make renting a preferred option for Indians - Makaan.com Buy vs. Rent Index (MBRI JAS 2014)
Rapid urbanization, sound economy and improved infrastructure, make cities a favorite dwelling option. With the recovering market and new projects in store, the inhabitants here end up in utter confusion on whether to stay on rent or to use the rental amount as EMI to buy a home. At times he feels staying on rent is far economical but at times he is drawn by the sentiments of owning a home. The high property prices, increasing home loan rate, and innumerable projects puts him in deep contemplation. In the absence of a robust and reliable tool, these decisions were traditionally taken with gut feel or with the guidance of a close relative / friend, leaving a great scope for error. To help out such property seekers Makaan.com launched Makaan.com Buy Vs Rent Index (MBRI), a tool that aims to help property seekers make informed choice between buying and renting of property in top Indian cities / sub-cities home.
How to interpret MBRI Data:
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.
Makaan.com Buy vs. Rent Index (MBRI) for top Indian cities / areas (Jul-Sept 2013 to Jul-Sept 2014)
The MBRI for the period of Jul to Sept 2014 highlights the fact that most of the Indian cities property prices have skyrocketed making them fall in the rent category. However, the MBRI index for cities like Hyderabad have seen a drastic drop which has made the national MBRI index for JAS 2014 settle at 25. This data depicts that currently India is a neutral destination, people can choose to buy or rent in a city depending upon the city or the locality and their financial condition. Interestingly for the same quarter last year i.e JAS 2013 the National MBRI index was at 28, this pointed that renting was more affordable in almost all cities in India over buying and speculating. Change in the index could be due softening of prices in some cities of India.
On analyzing the MBRI for JAS 2014 for 31 sub-cities in India (see table), it was observed that cities like Mumbai, Pune, Delhi, Chennai, and Ahmedabad are preferred for renting whereas Bangalore came in the Neutral zone and Hyderabad was more conducive of buying. It is interesting to compare the 2014 data with the index for 2013. In 2013, out of the 31 sub-cities, in only one sub-city was favorable for buying whereas for JAS 2014 as many as five cities have moved in the buy category. The report indicates that property prices in some areas have fallen which has made buying more preferable than renting in some major cities of India. Read further to know more regarding MBRI changes on a city basis.
MBRI analysis for Mumbai:
The MBRI index for the city of Mumbai has moved up by just one point 34(Rent) to 35(Rent) Jul-Sept’13 to Jul-Sept’14 respectively. This makes the overall city more conducive for renting. This shift in MBRI can be attributed to hardening of overall property prices which makes buying of property difficult. This phenomenon can also be attributed to stable rental rates in the city.
According to the report, all the sub-cities of Mumbai i.e. Mumbai Andheri-Dahisar(34), Mumbai Beyond Thane(35), Mumbai Harbour(40), Mumbai Mira Road And Beyond (30), Mumbai Navi (32), Mumbai South (36), Mumbai South West (32), Mumbai Thane (39) are recommended for renting over buying. These sub-cities have an MBRI value of 25+ indicating that in these cities it is much more expensive to buy a home than to stay on rental.
MBRI analysis for Delhi NCR:
The MBRI for the city of Delhi NCR has remained stable at 39 over the last year. The capital city of India hence remains in the rental range. The stabilization in MBRI index can be attributed to stability in property prices, although some sub-cities have shown variation in property prices and in the MBRI index. Within the main Delhi city, all areas including Delhi East(38), Delhi North (52), Delhi South (57), Delhi West(45), Dwarka (55), Faridabad (32), Greater Noida (38) and Gurgaon (32) are in the rental range which means that it is far more expensive to buy a property in these areas than to stay on rental. However, the MBRI index has dropped for two sub-cities of Delhi. The index for Ghaziabad has dropped from 26 to 25 making it fall in the neutral category whereas the index of Noida has fallen by five points from 24 to 19 making Noida the only destination in NCR where buying is more preferable.
MBRI analysis for Bangalore:
The index for the city of Bangalore lies in the Neutral range but the MBRI moved up from 22 to 25 from Jul-Sept’13 to Jul-Sept’14 respectively. This small shift in MBRI can be attributed to a marginal increase overall property prices which makes investing in a property a bit more difficult. Overall the city remains to be a diverse destination as Bangalore Central (39) and Bangalore West (26) come in the rental category and Bangalore North (22) fall in the neutral category whereas Bangalore East(20) and Bangalore South (19) lies in the buy range.
MBRI analysis for Chennai:
The index for the city of Chennai has remained stable at 26 over the last year, making it fall in the rent category by fraction of a margin. This stability in MBRI can be attributed to hardening of property prices for both buying and renting. Property seekers in Chennai North (28) should opt to rent whereas Chennai South (24) can decide to buy or rent based on their financial situation.
MBRI analysis for Hyderabad:
The index for the city of Hyderabad has dropped drastically from 25 in Jul-Sept’13 to 17 in the Jul-Sept’14 period. The sub-cities of Hyderabad hence lie in the buy range. This drastic drop in MBRI can be attributed to softening of property prices and / or hardening of rentals. Property seekers in sub city Hyderabad (18) and Secunderabad (17 ) are advised to buy a property as the city is currently offering affordable housing.
MBRI analysis for Pune:
The index for the city of Pune has increased marginally from from 29 to 32 for Jul-Sept period in 2013 and 2014 respectively. The increasing property prices in Pune has made renting a property more preferable and economical.
MBRI analysis for Ahmedabad:
The MBRI for the city of Ahmedabad has marginally come down from 33 in Jul-Sept’13 to 31 in Jul-Sept 14 period. In the city investors are recommended to go for renting rather than buying properties. All the sub cities of Ahmedabad - Ahmedabad West(29), Ahmedabad East (28), Ahmedabad North (36) fall in the rental category, this can be due to increase in property prices in the city or stability in rental rates.