Renting preferred over buying as property prices soar: Makaan.com Buy vs. Rent Index (MBRI OND 2014)
Everyone has an opinion on whether it is better to rent or buy a home in the prevailing real estate 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. A comparison between the MBRI for Oct-Dec. 2013 and MBRI for Oct-Dec. 2014 shows that within the last one year, key real estate markets have become more attractive for renting.
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 (Oct-Dec 2013 to Oct-Dec 2014)
The MBRI for the period of Oct to Dec 2014 highlights the fact that most of the Indian cities property prices have skyrocketed making them fall in the rent category. This data depicts that currently India is a rent conducive destination, people should prefer to take a flat on rent rather than buying a property. For the same quarter last year i.e OND 2013 the National MBRI index was at 28, for OND 2014 the index has moved one point up to 29. Change in the index could be due rise in property prices in cities of India.
On analyzing the MBRI for Oct-Dec 2013 for almost all cities and sub-cities in India (see table), it can be observed all the cities i.e Mumbai, Pune, Delhi, Hyderabad Chennai, Bangalore and Ahmedabad are preferred for Renting. 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 2014 data with Oct-Dec. 2013. In 2013, out of the 31 sub-cities, seven sub-cities were either in buying or neutral category; however, in Oct-Dec. 2014 MBRI, only six sub-cities fall under the buying or neutral category. 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 remained stable at 34 (Rent) over the last year. The index highlights that the overall city is more conducive for renting. The stability in MBRI can be attributed to stability of overall real estate prices. 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(35), Mumbai Beyond Thane(36), Mumbai Harbour(36), Mumbai Mira Road And Beyond (32), Mumbai Navi (31), Mumbai South (32), Mumbai South West (34), Mumbai Thane (38) 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 has dropped drastically from 39 (Rent) in Oct-Dec’13 to 34 (Rent) in the Oct-Dec’14 period. However, the capital city of India remains in the rental range. The drop in MBRI index can be attributed to softening in property prices in the certain pockets. Within the main Delhi city, all areas including Delhi East (38), Delhi North (28), Delhi South (39), Delhi West(39), Dwarka (58), Faridabad (34), Greater Noida (29) and Gurgaon (30) 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 shows that two sub-cities of Delhi fall in the neutral range. The index for Ghaziabad has dropped from 26 to 21 making it fall in the neutral category whereas the index of Noida has increased by two points from 22 to 24 but still Noida falls in the neutral destination. In both these destinations people can choose to buy or rent, depending their financial condition.
MBRI analysis for Bangalore:
The index for the city of Bangalore has risen drastically from 21 (Neutral range) in Oct-Dec’13 to 26 (Rent) in Oct-Dec’14 respectively. This drastic shift in MBRI can be attributed to a skyrocketing property prices which makes investing in a property a bit more difficult. Overall the city remains to be a diverse destination as Bangalore Central (36) and Bangalore West (30) come in the rental category and Bangalore North (25) fall in the neutral category whereas Bangalore East(17) and Bangalore South (20) lies in the buy range.
MBRI analysis for Chennai:
The index for the city of Chennai has remained stable at 28 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 (27) as well as Chennai South (29) should opt to rent.
MBRI analysis for Hyderabad:
The index for the city of Hyderabad has increased marginally from 25 (Neutral) to 27(Rent) for Oct-Dec period in 2013 and 2014 respectively. Property seekers in sub city Hyderabad (21) are advised to buy or rent a property depending on their financial condition, whereas in Secunderabad (32) people are advised to take a property on rent.
MBRI analysis for Pune:
The MBRI for the city of Pune has gone up sharply from 28 (Rent) in Oct-Dec’13 to 35 (Rent) in Oct-Dec 14 period. The increasing property prices in Pune has made renting a property more preferable and economical.
MBRI analysis for Ahmedabad:
The index for the city of Ahmedabad has dropped drastically from 33 (Rent) in Oct-Dec’13 to 27 (Rent) in the Oct-Dec’14 period. However, even after a drastic drop the city still lies in the rental range. In the city investors are recommended to go for renting rather than buying properties. All the sub cities of Ahmedabad - Ahmedabad West (27), Ahmedabad East (38), Ahmedabad North (37) fall in the rental category, this can be due to increase in property prices in the city or stability in rental rates.