Mumbai, December 16, 2013: While buying a house in Mumbai was never cheaper by any standards for an average middle class person, the present conditions in the city’s real estate market are more to worsen the scenario.
Though property prices have always been steep and not shown any correction in the recent past forcing many to live on rent, more surprising this time are rising prices of renting a property in the city that would weigh down intentions of those who are considering renting as an option.
A recent study by India’s first and the largest online personal finance advisor ArthaYantra in its second edition of ‘Buy Vs Rent Report, 2014’ revealed these observations.
According to ArthaYantra Buy Vs Rent Score (ABRS) – that indicates whether it makes financial sense to buy a house or live on rent in a particular city – ranks Mumbai the lowest with a score of 55 amongst eight top Indian cities in terms of buying and renting. Both these options in this city are the most expensive compared to others. This ranking which slipped by 10 points over the last year (65) is largely due to higher increase in the property value compared to increase in rental value.
Average rental in the city has been pegged at Rs 31,500, an increase of about 9% over last year’s rental levels, making it difficult even for renting.
The city is becoming more difficult for a buyer of house, as well. As the report clearly indicates, a person with income between Rs 8 to 25 Lakh per annum cannot afford buying a house and in that case, he is better-off opting for a rented property. The average price of a 1,000 sq.ft. of property in Mumbai has touched to Rs.1.33 crore from that of Rs 1.09 crore for the previous year, registering an increase of 22 per cent.
Further, a person who is looking forward to buy a property in Mumbai will have to save for 11 years in order to arrange funds for a down-payment; a 20 to 25 per cent of obligation any financial institution will want its buyer to pay while granting a loan. Based on the previous year’s prices, a middle professional needed to save for 8 years.
Even the area an average buyer gets in Mumbai is shrinking. Now, a new home buyer will get 18 per cent lesser carpet area compared to the previous year. Interestingly, per lakh of rupees invested, the buyer will now end up getting only 7.5 sq.ft. of area. This means that a professional who wants to own a home in Mumbai will have to spend three times more than what he spends in Hyderabad for the same sq.ft. area.
Commenting on the 2014 edition of this unique Report, said Mr Nitin Vyakaranam, Founder and CEO of ArthaYantra, “The property price and rental value of the place speak volumes about why one should rent or buy the place. Since everything in personal finance is interconnected, buying or renting have impact on the amount of money being spent on the house, the tax savings being received and many other important things. But one can't only rely just on the rent to buy ratio and make the decision to buy without assessing his personal finance affordability. This report helps an individual take an informed decision in this area. One can also use the ABRS (Buy Vs Rent) calculator which is freely available on company’s website.”
National Buy Vs Rent Scenario:
Ranking first, Hyderabad continues to be the most affordable city both in terms of buying and renting a home. At income levels of as low as Rs 13 Lakh to as high as Rs 25 Lakh, a person can afford buying a house in Hyderabad. But those who earn less than Rs 8 Lakhs per annum are advised to rent.
Nationally, entering into the league of ArthaYantra’s survey for the first time this year, Ahmedabad holds the second position where buying a home is still affordable. The professional with an income of more than 12 lakhs per annum can buy a home. Individuals earning Rs 8-12 Lakh per annum are recommended to rent.
Though property prices have always been steep and not shown any correction in the recent past forcing many to live on rent, more surprising this time are rising prices of renting a property in the city that would weigh down intentions of those who are considering renting as an option.
A recent study by India’s first and the largest online personal finance advisor ArthaYantra in its second edition of ‘Buy Vs Rent Report, 2014’ revealed these observations.
According to ArthaYantra Buy Vs Rent Score (ABRS) – that indicates whether it makes financial sense to buy a house or live on rent in a particular city – ranks Mumbai the lowest with a score of 55 amongst eight top Indian cities in terms of buying and renting. Both these options in this city are the most expensive compared to others. This ranking which slipped by 10 points over the last year (65) is largely due to higher increase in the property value compared to increase in rental value.
Average rental in the city has been pegged at Rs 31,500, an increase of about 9% over last year’s rental levels, making it difficult even for renting.
The city is becoming more difficult for a buyer of house, as well. As the report clearly indicates, a person with income between Rs 8 to 25 Lakh per annum cannot afford buying a house and in that case, he is better-off opting for a rented property. The average price of a 1,000 sq.ft. of property in Mumbai has touched to Rs.1.33 crore from that of Rs 1.09 crore for the previous year, registering an increase of 22 per cent.
Further, a person who is looking forward to buy a property in Mumbai will have to save for 11 years in order to arrange funds for a down-payment; a 20 to 25 per cent of obligation any financial institution will want its buyer to pay while granting a loan. Based on the previous year’s prices, a middle professional needed to save for 8 years.
Even the area an average buyer gets in Mumbai is shrinking. Now, a new home buyer will get 18 per cent lesser carpet area compared to the previous year. Interestingly, per lakh of rupees invested, the buyer will now end up getting only 7.5 sq.ft. of area. This means that a professional who wants to own a home in Mumbai will have to spend three times more than what he spends in Hyderabad for the same sq.ft. area.
Commenting on the 2014 edition of this unique Report, said Mr Nitin Vyakaranam, Founder and CEO of ArthaYantra, “The property price and rental value of the place speak volumes about why one should rent or buy the place. Since everything in personal finance is interconnected, buying or renting have impact on the amount of money being spent on the house, the tax savings being received and many other important things. But one can't only rely just on the rent to buy ratio and make the decision to buy without assessing his personal finance affordability. This report helps an individual take an informed decision in this area. One can also use the ABRS (Buy Vs Rent) calculator which is freely available on company’s website.”
National Buy Vs Rent Scenario:
Ranking first, Hyderabad continues to be the most affordable city both in terms of buying and renting a home. At income levels of as low as Rs 13 Lakh to as high as Rs 25 Lakh, a person can afford buying a house in Hyderabad. But those who earn less than Rs 8 Lakhs per annum are advised to rent.
Nationally, entering into the league of ArthaYantra’s survey for the first time this year, Ahmedabad holds the second position where buying a home is still affordable. The professional with an income of more than 12 lakhs per annum can buy a home. Individuals earning Rs 8-12 Lakh per annum are recommended to rent.
Pune ranks 3rd in India where a person can think of buying a house, if his income levels are between Rs 13 to Rs 15 Lakh. A professional with an income range of Rs 15 to Rs 19 Lakh can think of buying. The average purchase price is Rs 53.89 Lakh / 1000 sq.ft. Pune lets you achieve the dream of buying a house in least number of years among the eight cities, i.e. 5 years of saving for the required corpus for down payment.
Bengaluru has seen relatively higher growth in the rental rates compared to the property prices. Bengaluru is ranked 4th on affordability to buy and 3rd on affordability to rent. Individuals earning up to Rs 15 Lakh are advised to rent the home whereas Individuals with annual income of Rs 15 – Rs 19 Lakh are in the ABRS neutral zone (can buy or rent). Individuals earning more than Rs 10 Lakh are advised to buy a home.
Real estate in Kolkata scored substantially both in terms of property prices and rental prices. The average rental value and property value of the place has increased by 24 per cent over the last year. The report ranks Kolkata 5th on affordability to buy and 7th on affordability to rent highlighting high rentals in Kolkata. Individuals with annual income of less than Rs 14 Lakh are advised to rent whereas individuals earning more than Rs 14 Lakh are advised to buy a home.
In Chennai, rental value has increased by 14 per cent, whereas the property prices have increased by 6 per cent. Chennai is ranked 5th on affordability to buy and 4th on affordability to rent. Individuals with annual income of less than Rs 20 Lakh cannot afford buying a home and are advised to opt for rent. Individuals with annual income of Rs 20 – Rs 24 Lakh are in ABRS neutral zone whereas individuals earning more than Rs 24 Lakh are in affordable zone to buy a home.
Delhi stands as the second costliest real estate market in India. However, the higher property prices did not translate to high rental prices of the city. Due to its relatively lower rental value compared to Kolkata and Mumbai, Delhi is the 6th affordable place to rent. The ABRS score for individuals within the salary range of Rs 8 – Rs 25 Lakh remains at 55, making Delhi a place to rent.
Bengaluru has seen relatively higher growth in the rental rates compared to the property prices. Bengaluru is ranked 4th on affordability to buy and 3rd on affordability to rent. Individuals earning up to Rs 15 Lakh are advised to rent the home whereas Individuals with annual income of Rs 15 – Rs 19 Lakh are in the ABRS neutral zone (can buy or rent). Individuals earning more than Rs 10 Lakh are advised to buy a home.
Real estate in Kolkata scored substantially both in terms of property prices and rental prices. The average rental value and property value of the place has increased by 24 per cent over the last year. The report ranks Kolkata 5th on affordability to buy and 7th on affordability to rent highlighting high rentals in Kolkata. Individuals with annual income of less than Rs 14 Lakh are advised to rent whereas individuals earning more than Rs 14 Lakh are advised to buy a home.
In Chennai, rental value has increased by 14 per cent, whereas the property prices have increased by 6 per cent. Chennai is ranked 5th on affordability to buy and 4th on affordability to rent. Individuals with annual income of less than Rs 20 Lakh cannot afford buying a home and are advised to opt for rent. Individuals with annual income of Rs 20 – Rs 24 Lakh are in ABRS neutral zone whereas individuals earning more than Rs 24 Lakh are in affordable zone to buy a home.
Delhi stands as the second costliest real estate market in India. However, the higher property prices did not translate to high rental prices of the city. Due to its relatively lower rental value compared to Kolkata and Mumbai, Delhi is the 6th affordable place to rent. The ABRS score for individuals within the salary range of Rs 8 – Rs 25 Lakh remains at 55, making Delhi a place to rent.
