Factors that help decide whether to Buy or Rent a house in Bengaluru

Bengaluru, also known as the Silicon Valley of India, is one of the most sought-after cities for living and working in India. The city offers a vibrant and cosmopolitan culture, a booming IT and start-up sector, a pleasant climate, and a plethora of educational and recreational opportunities. However, the city also faces some challenges, such as traffic congestion, pollution, high cost of living, and limited land availability.

One of the most important decisions that people face when moving to Bengaluru is whether to buy or rent a house. Both options have their own pros and cons, and the choice depends on various factors, such as budget, location, lifestyle, income, and future plans. In this article, we will discuss some of the factors that can help you decide when to choose a rented house instead of buying a house in Bengaluru.
 

Budget

Buying a house is an expensive affair. It requires a large amount of down payment, stamp duty, registration charges, maintenance costs, property taxes, and home loan EMIs. According to a recent report , the average price of a residential property in Bengaluru was ₹ 5,545 per sq ft in the first half of 2023. This means that buying a 1,000 sq ft apartment would cost around ₹ 55.45 lakh, excluding other expenses.

On the other hand, renting a house is relatively cheaper and involves lower initial costs. You only need to pay a security deposit (usually equivalent to 10 months' rent), monthly rent, and utility bills. According to the report , the average rent for a residential property in Bengaluru was ₹ 18 per sq ft per month in the first half of 2023. This means that renting a 1,000 sq ft apartment would cost around ₹ 18,000 per month, excluding other expenses.

Therefore, if you have a tight budget or do not want to invest a large amount of money in real estate, renting may be a better option for you.

Location

Job changes are more frequent at present. You may need to relocate to another city or country for better career opportunities or personal reasons. In such cases, owning a house can limit your mobility and flexibility. You may face difficulties in selling or renting out your house in a short span of time or at a good price. You may also have to bear the burden of paying EMIs even when you are not living in your house.

On the other hand, renting a house gives you more freedom and convenience to move to another place whenever you want. You just need to give a notice period (usually one or two months) to your landlord and vacate your house without any hassle. You can also choose a location that is closer to your workplace or preferred amenities and save time and money on commuting.

Therefore, if you value mobility and convenience over stability and security, renting may be a better option for you.

Asset Creation

The major selling point for purchasing a house is that it will help you build an asset. A house is not only a place to live but also an investment that can appreciate over time and generate income. You can use your house as collateral to avail loans or sell it at a profit when you need money. You can also claim tax benefits on your home loan interest and principal payments under Section 24 and Section 80C of the Income Tax Act.

On the other hand, renting a house does not create any asset for you. You are paying money to someone else for using their property and not gaining any ownership or equity. You cannot claim any tax benefits on your rent payments unless you are living in a rented house for business purposes under Section 10(13A) of the Income Tax Act.

Therefore, if you want to create an asset for yourself and your family and enjoy tax benefits on your home loan payments, buying may be a better option for you.

Income Generation

Rental yields in India are not high. Rental yield is the annual rent earned from a property divided by its market value. According to Magicbricks, the average rental yield in Bengaluru was 3% in 2023. This means that if you buy a property worth ₹ 1 crore in Bengaluru, you can expect to earn ₹ 3 lakh per year as rent from it.

On the other hand, home loan interest rates in India are relatively high. According to BankBazaar, the average home loan interest rate in India was 8% in 2023. This means that if you take a home loan of ₹ 1 crore for 20 years in India, you will have to pay ₹ 83.78 lakh as interest over the loan tenure.

Therefore, if you buy a house with a home loan and rent it out, you may end up paying more interest than earning rent. You may also have to deal with the hassles of finding and managing tenants, maintaining the property, and paying taxes and charges.

On the other hand, if you rent a house, you can save the money that you would otherwise spend on buying a house and invest it in other avenues that can generate higher returns. For example, you can invest in mutual funds, stocks, bonds, gold, or other assets that can offer higher returns than real estate.

Therefore, if you want to generate more income from your money and diversify your portfolio, renting may be a better option for you.

Flexibility

Buying a house is a long-term commitment that requires careful planning and research. You need to consider various factors, such as location, size, layout, amenities, quality, price, legalities, and future prospects of the property before making a purchase decision. You also need to be prepared for any contingencies or emergencies that may affect your ability to pay your home loan EMIs or maintain your property.

On the other hand, renting a house is a short-term arrangement that allows you to change your house according to your needs and preferences. You can choose a house that suits your budget, lifestyle, and taste without worrying about the long-term implications. You can also experiment with different types of houses, such as apartments, villas, independent houses, or co-living spaces. You can also upgrade or downgrade your house as per your changing requirements.

Therefore, if you want to have more flexibility and choice in your living space, renting may be a better option for you.

There is no definitive answer to whether renting or buying a house is better in Bengaluru. The decision depends on your personal and financial situation and goals. You need to weigh the pros and cons of both options and choose the one that suits you best. You can also use online calculators or consult experts to compare the costs and benefits of renting vs buying a house in Bengaluru.