Should you move on rent or buy a house? Check out what Makaan.com Buy vs. Rent Index (MBRI) suggests for your city
Property prices in India soared to new heights or the residential realty sector has witnessed a general softening of rentals across India shows the Makaan.com Buy vs. Rent Index data. It still remains to be seen whether the current high property prices will come down in 2014; however, what comes out clearly according to current Makaan.com Buy vs. Rent Index (MBRI) is that the key Indian cities, including Mumbai, Delhi, Ahmedabad 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 Apr-June 2011 and MBRI for Apr-June 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 (Apr-June 2011 Vs Apr-June 2013)
The national MBRI data for Apr-June 2013 reflects that renting is preferred over buying. 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 Apr-June 2013 for 31 sub-cities in India (see table), it can be observed that cities like Mumbai, Delhi, Chennai and Ahmedabad are preferred for Renting whereas Bangalore, Pune and Hyderabad are in the Neutral zone. In fact, there is no city in India 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 Apr-June 2011. In 2011, out of the 31 sub-cities, 20 were either in buying or neutral category; however, in Apr-June 2013 MBRI, only 12 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 shifted from neutral to rental within the two years. From 2011 to 2013, the MBRI going from 24 to 31 indicates that the property prices have increased at a rate which was higher than the rate of growth for rentals. In the Apr-June 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 Apr-June 2011 Mumbai Andheri-Dahisar, Mumbai Beyond Thane, Mumbai Mira Road And Beyond were in Neutral zone meaning one could have decide to buy here depending on their financial situation and Mumbai South West and Mumbai Thane were in the buying zone.
Ahmedabad – MBRI data for 2011 had placed the city of Ahmedabad in Neutral zone (MBRI 25) whereas in 2013, MBRI has grown to 34 making renting a better option. Within Ahmedabad city, the MBRI for Ahmedabad North, has jumped 20 points (it has risen from 18 in 2011 to 38 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 34 respectively.
Delhi NCR – The index for the city of Delhi NCR has moved 9 points further on the rental scale from Apr-June 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 Noida and Gurgoan that were in the Buying rating in 2011 have moved to neutral zone. However, as compared to the main city of Delhi, the NCR still remains affordable. Home buyers are advised to purchase property in Ghaziabad, Faridabad and Noida depending up on their financial condition as MBRI for these sub-cities lies between 21 and 25. Among areas that should be preferred for renting, Dwarka takes the lead. In Dwarka, the MBRI has jumped the highest in two years, 22 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 19 to 21 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 19 in Apr-June 2011 to 25 Apr-June 2013 remaining in 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 16 to 26 from Apr-June 2011 to Apr-June 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 remained the same for the two years. The MBRI for Apr-June 2011 and Apr-June 2013 has remained 25 keeping the area in Neutral Zone. Property seekers in Pune have to be a little cautious while making the property purchase as the prices have started increasing.