Is It Time To Stop Renting And Consider Buying?
Awaiting a price correction and hoping to save money to buy your own home? We explain why NOW is the best time to buy a house.
It’s no secret that the Indian real estate space is witnessing high price levels at the moment, despite low demand and unsold units in scores of development projects across the country. Buying a house is out of the reach of millions of Indians, and only a few take the step of buying a house with a home loan. Meanwhile, the rest continue to live in rental accommodation or shared homes with their family members.
The rental housing conundrum
Those who rent homes end up spending a lot of money every year – apart from the monthly rent, there are bills and a one-time security deposit to pay. The money spent on rent racks up to lakhs of Rupees per year; consider that if you pay Rs 15,000 to rent a 1 BHK house in the Mumbai suburbs, you are actually paying Rs 15,000 x 12 = Rs 1,80,000 per year on rent alone. This money is paid to the house owner and is not refundable! You end up paying more if the home owner decides to increase the rent by 10% the following year. Also consider that paying rent and the house bills does not entitle you, the renter, to any kind of ownership of the house.
Now contrast this state of affairs with a person who decides to buy a house after taking a home loan. Say their monthly EMI is Rs 15,000. Now this EMI is paid towards repaying the loan, and every succeeding EMI helps increase their stake in the property. Once the loan is repaid in full, the house ownership is completely passed into the hands of the loan borrower.
Which of these two situations would you rather be in?
Why buying a house is right, right now
Post-demonetisation in November 2016, banks and financial institutions in the country announced a correction in their home loan interest rates. The country’s biggest banks slashed their interest rates to 8.6%, and many housing finance companies followed suit. Today, the best housing finance companies like PNBHFL offer the lowest ever 8.5% on current home loan interest rates, for salaried applicants. Meanwhile, PNBHFL offers 8.5% to 9% latest home loan interest rates under its Ghar Utsav Scheme valid till June 30, 2017.
Most banks and financial institutions are offering current home loan interest rates hovering between 8.5% to 10%. While some financial pundits anticipate a further correction in the coming months, it is safe to say that the time to buy a house is right now.
Taking advantage of the low home loan rates, first time buyers must intensify their property search and finalise a property soon. This is how a low interest rate is beneficial:
- The monthly EMI is lower, if the interest rate is lower. This makes the loan more affordable.
- Since the EMI is lower, it leaves more of the monthly income towards other expenses.
- The overall repayment is lower with a lower interest rate.
The current home loan interest rates paint an extremely encouraging picture for potential home buyers, both first time buyers and investors. With lakhs of unsold units in the country, real estate developers are also looking to sell their inventory, so the window for negotiation is wider at the moment. So this could be the year that you move out of a rented home and into your own house – and what a wonderful thing it is to own home of your own!