High property prices make renting a preferred option for Indians-Makaan.com Buy vs. Rent Index (MBRI)
Gurgaon, March 6, 2013: High property prices in most Indian markets are making people opt for rental accommodation. Property prices in India have soared between 2010 and 2012 where-as rentals have remained stable making renting a preferred option for home seekers. This trend has also been captured in the latest update of Makaan.com Buy vs. Rent Index (MBRI) for the past one year: Oct-Dec 2011 to Oct-Dec 2012. Staying on rent or buying a property is a confusion that takes much time of an urban citizen. Home Buying is not an easy decision especially in the Metros with various socio-economic factors play an important role in this decision. Though the improved market situations and the increasing number of new launches lure home buyers’ desire to own a house, he has to contemplate a lot before making the major decision of his life. Meanwhile, due to the absence of an Indian real estate regulatory system that gives a consolidated data on property rates existing in various localities, upcoming projects, legal issues involved etc., it becomes difficult for a home buyer to make such a certain decision. To help out such property seekers Makaan.com has 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.
Let’s see which cities / areas are preferred for Buying and which ones make more sense for Renting
Buy vs. Rent Index (MBRI) for top Indian cities / areas (Oct-Dec 2012)
The MBRI data for Oct-Dec 2012 when compared with last year reflects that renting is preferred over buying as the property prices have moved to a higher range. 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. On analyzing the MBRI for Oct–Dec 2012 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 have moved to Neutral zone over the last one year; at present, there is no city in which Buying a property is advisable. While this scenario is applicable at the city level; there are areas or sub-cities within the main city where buying still make more sense. Read on to know more.
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.
Buy vs. Rent analysis for Mumbai – The index for the city of Mumbai has remained on the rental side over the year. This indicates hardened property prices and / or stable property prices to slightly softened rental rates in the city through out the year. All the sub-cities in Mumbai remain in the rental zone. Sub-cities of Mumbai, Mumbai Andheri-Dahisar, Mumbai South West, Mumbai Beyond Thane and Mumbai Harbour have been in the Rental zone over the last year indicating rising property prices or softening of rentals. There is some softening of property prices in Mira Road and beyond which is indicated by drop of one MBRI point during the last year.
Buy vs. Rent analysis for Ahmedabad – Property seekers in Ahmedabad have witnessed a significant property price rise in the last one year, especially property in Ahmedabad North, wherein the MBRI figures jumped 9 points; it has raised from 26 points to 35. Ahmedabad West and East have seen a moderate price correction, although the MBRI for both these areas is still over 25 which indicate a preference for renting over buying.
Buy vs. Rent analysis for Delhi NCR – The index for the city of Delhi NCR has moved 4 points further on the rental scale over the last year. This indicates property prices have moved up or rental rates have softened over one year. The NCR region still remains affordable compared to main Delhi city. Ghaziabad, Noida and Gurgaon have moved to neutral zone, wherein Home buyers are advised to purchase property depending up on their financial condition. Faridabad is the only region in Delhi NCR which remains in the Buying zone and investing in property there is recommended. Among areas that should be preferred for renting, Dwarka takes the lead. Here rentals are far cheaper compared with the prevailing property prices.
Buy vs. Rent analysis for Bangalore – The index for the city of Bangalore has moved to Neutral zone from Buying zone. The MBRI figure has moved from 19 to 21 over the year. The city is now suitable for making a conscious investment. Within the city, main pockets like Bangalore Central, Bangalore North and Bangalore West remain in the neutral range meaning one can decide to buy or rent based on their financial situation. Areas like Bangalore East and Bangalore South are recommended for buying indicating that it is far more economical to buy a property in these areas than to stay on rent.
Buy vs. Rent analysis for Hyderabad –The index for Hyderabad city has moved up to 20 from 24 remaining in the neutral zone. The current MBRI figure shows the city is now suitable for making a conscious investment.
Buy vs. Rent analysis for Chennai – The index for the city of Chennai has increased from 21 to 28 from OND’11 to OND’12 period respectively. The city is now in the Rental range, property seekers in Chennai are advised to rent a property rather than buying.
Buy vs. Rent analysis for Pune – The index for the city of Pune has moved 4 point further and has moved to the rental scale after remaining in the neutral zone for last one year. This figure gives a slight indication that the property prices have gone up in the last four quarter 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.
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.
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.