Own or Rent – a claim during a pandemic for a first-time home buyer
In the Indian psyche, the notion of owning a house has always been prevalent. When our country grew from independence struggle, exile, and a time of confusion, it was profoundly ingrained for decades. It was akin to a rite of passage into maturity to purchase a home.
This idea has been somewhat blurred over the years of accelerated urbanization. The notion of renting a home came into being as people moved to towns for job opportunities.
It allowed them the privilege of mobility and being able to seek opportunities without being bound to properties in other cities. Renting out also allowed them sufficient freedom to move closer to the office and save time and travel costs for commuting.
COVID-19, cut to mid-2020, has cast the planet into disarray. Some have opted to remain back in the office in the wake of numerous lockdowns, and many have preferred to be with relatives.
Remote work is now a reality, which suggests that workers are now free to pick where they want to live. Companies are rethinking the future of workplaces and have given their staff a lengthy period of time to operate from home.
So, how does the case for rent vs. own play out? Let’s look at the possibilities for both.
Why do rentals lose their charm?
Due to the rapid global growth in disposable income and workplaces, big metros around the nation are recruiting talent by droves. The choice when moving to a new city has been to rent out a house instead of saving.
The premise was that if you stay on rent, you can stay in your place of choice comfortably, share it with others, and take time to settle on long-term opportunities. You could still rent out a posh apartment or move out anywhere and wherever you want if you wanted to improve your living standard.
But those remaining on rent are left debating their decision after the onset of the COVID-19 pandemic. Compared to those who owe their house in society, some of those staying on rent have faced more rigid laws. The importance of getting their own room is also realized by those living in shared accommodation.
Why is it worth investing in a house?
Disruptions such as an economic crisis, lack of jobs, and the pandemic are very vulnerable to financial difficulties, mental toll, and high levels of stress. The rent that once was inexpensive now becomes a source of emotional turmoil while living in a rental house.
During periods of turmoil, a house would also provide a safe haven for you and your loved one. In comparison, like other asset groups, an interest in real estate is not vulnerable to price fluctuations. This makes real estate an option to invest in that is stable. It is also a secure, visible commodity that in the future will provide protection against unexpected situations.
Last but not least, remember the fact that after paying rent for years, there are no actual returns, although you become the rightful owner of the asset at the end of an EMI tenure.
So, when are you supposed to invest in a house?
As soon as the earnings arrive. The market is packed with a plethora of schemes from the builders, government, and banks for first time home buyers.
You might look at an inexpensive home for a young investor in areas that have a high potential for development in the future, for example, near an upcoming airport or metro or an industrial zone designated by the government.
With both the Pradhan Mantri Awas Yojana (PMAY), the government allows first-time homebuyers to benefit from a credit-linked subsidy scheme (CLSS). If you can suit in with the eligibility for the annual household revenue, place and carpet area of the planned residence, etc., you can get an upfront interest subsidy up to Rs. 2.67 lakh.
Knowing that the revenue will be on the upward trajectory and that you will have more years of work, it is easier to gain permission for a bank loan. EMI is getting even more profitable and affordable, with the advantage of ensuring that in a few years you will completely own the land.
If you take advantage of the home loan, you are eligible for tax incentives that help you save money in the long run. If your investment falls into the definition of affordable housing as specified by government officials, you will get an additional tax advantage.
An investment worth considering is saving considerable tax, investing in a solid property that has the potential to earn you decent returns in the future and the pride of owning an estate until EMIs get over it. Investing in a house often means future-proofing yourself from liabilities you might face later in life.
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Why is now the right time?
There is no better time than now if you are trying to invest in real estate. The pace of home loans has been on a downward trend and is now at a 15-year low. In addition, stamp duties have recently been lowered by 3 percent until the end of December 2020.
Choosing a ready-to-move-in house would spare you the trouble of both rent and EMI fees. It would also save you from uncertainties over ownership deadlines that you can face under-construction assets, aside from being able to purchase what you see.
Just 2,600 of the total 77,460 unsold residential units across Mumbai, Thane, and Navi Mumbai are ready for possession, a recent compilation by JLL and CREDAI said. Lodha alone sold 1800 units in the last quarter and sales were more oriented towards preparation. This shows clearly that in the coming days there will be a demand-supply shortage and it is important to make the decision faster and protect your safe haven.
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