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Time to buy property in main Hyderabad - says Makaan.com Buy vs. Rent Index (MBRI)

Time to buy property in main Hyderabad - says Makaan.com Buy vs. Rent Index (MBRI)

Time to buy property in main Hyderabad - says Makaan.com Buy vs. Rent Index (MBRI)


A property seeker in Hyderabad is confused between opting for a rented accommodation or giving that rental amount as EMI for buying a house. 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 scope for error. The latest report from Makaan.com, the fastest growing real estate website in India, recommends Homebuyers in Hyderabad to start exploring their property options. The Makaan.com Buy Vs Rent Index (MBRI) for the period April to June 2011 was released today with some interesting findings.

MBRI is a tool that aims to help property seekers make informed choice between buying and renting of property in top Indian cities / sub-cities. When it comes to Hyderabad, the city is divided into 2 sub-cities and MBRI is calculated for each sub-city to enable seekers make informed choice in their respective areas of interest. Let’s look at some recommendations for buying Vs. renting property in Hyderabad.


Buying destinations in Hyderabad

Typically if the MBRI for a city / sub-city is between 1-20 it 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. The current MBRI release identifies main parts of Hyderabad as areas where property seekers will be advised to buy rather than stay on rent. If one compares the MBRI for this sub city with the data for Jan-March’11, MBRI has dropped by 4 points (see chart for details). This drop can be attributed to correction in property prices and/or hardening of rentals in these sub-cities thereby making them a preferred buying destination.

Neutral destinations in Hyderabad

The Sub-citiy of Secunderabad falls under the neutral category. This sub-city has an MBRI of 21-25 which denotes that it is relatively more expensive to buy a home than to stay on rental, in these 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. It is, however, interesting to note that MBRI for Secunderabad has dropped by a significant 8 points compared to it’s Jan-March’11 figure (see chart for details). This drop can be attributed to, correction in property prices and/or hardening of rentals here. The drop, however, is not significant to bring this sub-city in the buying destination category, but has shifted the sub-city from rent category earlier into the neutral category now.

Rental destinations in Hyderabad

There are no Hyderabad sub cities that fall under the Rental category for April-June’11 period.

Overall Hyderabad city trend

If one compares the current MBRI report with the previous report (for period of Jan-March’11) one observes that the current MBRI for Hyderabad city is 19 which is a drop of 6 MBRI points. This indicates that there has been an overall softening in property prices and/or hardening of rentals in the city over the past 3 months. This has shifted the Hyderabad city preference from a neutral destination (in Jan-March’11) into a buy destination now.



The MBRI for 7 Indian cities and their sub-cities for April – June’11 are given in the table below


Click here to enlarge

Nationally, the MBRI for India has moved from 21 points in JFM’11 to 22 points in AMJ’11 maintaining a neural destination for the country as a whole. At the city level MBRI for cities like Delhi (+1), Pune (+1), Ahmedabad (+4) and Bangalore (+1) have shown an upward movement over the last 3 months. On the other hand, MBRI for cities like Mumbai (-2), Hyderabad (-7) and Chennai (-2) reflected a downward trend. Among the cities covered under the study, the cities of Chennai, Hyderabad & Bangalore are recommended for buying over renting. The city of Delhi NCR is recommended for renting over buying whereas the cities of Mumbai, Pune and Ahmedabad are in the neutral zone.

Makaan.com Buy vs Rent Index is the first of its kind in the Indi­an real estate market, and covers the major Indian cities of Ahmedabad, Bangalore, Chennai, Delhi-NCR, Hyderabad, Mumbai, and Pune.

Launched in October-December 2010 quarter, Makaan Buy vs. Rent index is a quarterly initiative and will be updated every 3 months. This is the 3rd release of the index findings. The detailed findings can also be accessed at http://www.Makaan.com/MBRI


About MBRI

MBRI is a numerical value, arrived at after taking into account several factors including average capital value of property, average rental value, rental yield, historical capital price movement, historical rental movement and inflation. A low MBRI indicates that it is much less expensive to buy a home than to stay on rental whereas a high MBRI denotes that it is much more expensive to buy a home than to stay on rental. MBRI has been collated both at city and sub-city level.

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.


Selection of cities

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. Populous and ever growing urban agglomerates like Mumbai and NCR have an ever growing demand for housing.

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

Methodology

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 real estate 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.

Last Updated: Fri Sep 06 2013

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