With property prices sky-rocketing in Delhi NCR, the decision to buy or rent often comes across as a difficult choice. Factors like capital rates, rental rates, mortgage eligibility and property taxes make significant part of the decision making process.
Know the merits and demerits of buying or renting a home.
Since the costs associated with buying and renting are so varied in nature and weight, it becomes a complicated decision. Therefore, the ideal way to help you decide whether or not it makes sense to stay on rent for a long term is if the rent amount is lower than paying EMIs for the same time period.
Here’s a an analysis in Delhi NCR on buying versus renting based on average property prices and average rent prices of a standard 2BHK apartment of 1000 sq ft size. To be able to make a meaningful analysis, a few constants have been assumed –
- Loan or renting tenure is 20 years
- Rate of interest on home loan is 11 per cent
- Down payment required to be paid is 20 per cent
Gurgaon
As per the average property prices, a 1000 sq ft 2BHK apartment in Gurgaon would cost around Rs 76 lakh. After the payment of Rs 15.2 lakh as down payment, the buyer would have to pay Rs 67.4 lakh over a span of 20 years (including Rs 6.66 lakh as interest on home loan). This would amount to Rs 3.37 lakh every year or Rs 28,000 per month.
If the house is taken on rent instead of buying, an average rent of Rs 25,000 per month would have to be paid. Over a span of 20 years, the total expenditure would come out to be Rs 60 lakh. Since Gurgaon too is a growing area with developing infrastructure, it promises healthy returns over this time span.
East Delhi
The average cost of a 1000 sq ft 2BHK apartment in East Delhi is Rs 1.17 crore. A buyer would have to pay Rs 23.40 lakh as down payment. The remaining Rs 93.60 lakh would have to be paid by the buyer in EMIs along with 11% interest over 20 years. Every year, they would have to pay Rs 5.19 Lakh, which is almost Rs 43,200 per month
Now let’s look how much a person would have to pay to take such a home on rent. The average monthly rent for a similar home in East Delhi is around Rs 25,000. That makes it Rs 3 lakh in a year and Rs 60 lakh over 20 years.
Looking at the figures, it makes sense to rent a property in East Delhi rather than considering to purchase one.
North Delhi
The average price for a 1000 sq ft 2BHK apartment in North Delhi is around Rs 78 lakh. The buyer would have to pay around Rs 15.6 lakh as down payment and the remaining Rs 62.4 lakh as EMI. Including the 11% interest, the total amount to be paid comes down to Rs 69.26 lakh. Every year, the buyer would need to pay Rs 3.46 lakh which is approximately Rs 28,800 per month.
If the same house is taken on rent, an average monthly rent of Rs 20,000 would be needed to be shelled out. This amounts to Rs 2.40 lakh per year and Rs 48 lakh over 20 years.
Looking at the figures, it makes sense to rent a property in South Delhi rather than considering to purchase one.
West Delhi
A 1000 sq ft 2BHK apartment would cost an average of Rs 89 lakh in West Delhi. After paying a down payment of Rs 17.8 lakh, the buyer would have to pay close to Rs 71.2 lakh on 11 per cent interest as EMI. Including the interest amount, the total payout would come to Rs 79 lakh, which is Rs 3.9 lakh per annum or Rs 32,000 per month.
According to the average rent prevailing in West Delhi, a lessee would have to shell out Rs 14,700 per month equating to Rs 1.75 lakh per year and Rs 35 lakh in 20 years.
Looking at the figures, it makes sense to rent a property in North Delhi rather than considering to purchase one.
South Delhi
This is one of the most premium areas of Delhi. A standard 1000 sq ft property would cost around Rs 1.28 crore here. After paying a down payment of Rs 25.72 lakh, a buyer would have to pay Rs 1.02 crore as EMI. On adding the interest of Rs 11.32 lakh, the total amount to be paid comes to almost Rs 1.14 crore. In a year, the buyer would have to pay around Rs 5.7 lakh and in a month close to Rs 47,500.
If a similar house is instead taken on rent, there would be an average outflow of Rs 27,000-30,000 per month. Per year, it would cost almost Rs 3.6 lakh, amounting to Rs 72 lakh over 20 years.
Looking at the figures, it makes sense to rent a property in West Delhi rather than considering to purchase one.
Noida
A 2BHK apartment in Noida would cost around Rs 58.2 lakh. After paying Rs 11.64 lakh as down payment, the buyer is left with Rs 46.56 lakh to be paid as EMI. On adding the interest amount of Rs 5.12 lakh, the total amount to be paid comes down to Rs 51.68 lakh. Per year, the buyer would have to pay Rs 2.5 lakh, which amount to Rs 21,500 per month.
Had the person taken the home on rent, he would have paid an average of Rs 17,000-18,000 per month for a similar apartment. The total payout after 20 years would be around Rs 43.2 lakh. Considering Noida as a growth corridor and including the chances of property appreciation, it makes sense to buy a property in Noida, rather than renting.
Therefore, looking at the figures, it makes sense to buy a property in Gurgaon, rather than renting.
Ghaziabad
A 2BHK apartment in Ghaziabad would cost around Rs 46.5 lakh. After paying Rs 9.3 lakh as down payment, the buyer is left with Rs 37.2 lakh to be paid as EMI. On adding the interest amount of Rs 4.09 lakh, the total amount to be paid comes down to Rs 41.29 lakh. Per year, the buyer would have to pay Rs 2.06 lakh, which amount to Rs 17,200 per month.
Had the person taken the home on rent, he would have paid an average of Rs 13,000-15,000 per month for a similar apartment. The total payout after 20 years would be around Rs 31.6 lakh. While renting saves money over a long term, buying would end up in creating an asset for the lifetime. Considering both the scenarios, if you have the capacity to buy, it would make sense to do that.
With similar calculations, other NCR area where buying and renting could be a dillemma are –
| Location | Total Cost of Apartment | Total Cost After Interest | Monthly EMI | Monthly Rent | Total Rent Payout in 20 years | Buying versus renting |
| Greater Noida | Rs 37 lakh | Rs 32.85 | Rs 13,600 | Rs 10,600 | Rs 25.4 lakh | Buying |
| Faridabad | Rs 47.5 lakh | Rs 42.18 lakh | Rs 17,500 | Rs 13,000 | Rs 31.20 | Renting |
Please note: The calculations made above are done on certain assumptions. The component of taxes has been ignored and therefore, the actual decision of buying or renting depends entirely on your personal requirement and discretion.
