Buying a house or renting it is a major decision that is dependent on the city where you work, your financial health and personal goals. Both require a regular income and a certain degree of effort to maintain. While renting offers flexibility, it entails regular monthly expenditure.
Home ownership, on the other hand, may bring in intangible benefits such a sense of stability and pride of ownership, the million dollar question is to do with whether it is affordable. Moneycontrol and LiasesForas conducted a survey of the most and the least affordable cities in the country. For this a total of 32 cities with 41,482 projects were considered. Manisha Gupta speaks to experts on what is the most important criteria while buying a house or for that matter renting one.
Affordability of a house depends on many factors such as purchasing power, cost of living, connectivity, ease of access among others. Moneycontrol-Liases Foras House Purchase Affordability Index considers rental yields as the chief parameter. The index represents how easy or difficult it is to own a property in different cities.
“The reason being that rentals best represent the purchasing power for housing. Capital values can be speculative but not rentals. While comparing big and small cities, the yardstick had to be the same. For example, if in Bengaluru, the spread is 50 km, in smaller cities such as Raipur, the spread is only 10 km. These geographies also have different purchasing power and income classes. We wanted the rental yield representation across the entire cross section of cities for which we divided cities into distance bands and considered the maximum distance from the city centre to the spread of the projects,” said Pankaj Kapoor, managing director, Liases Foras.
What is the most important criteria while buying a house?
Rental yields represent how many months are required to own a property. The Moneycontrol-Liases Foras House Purchase Affordability Index is a reflection of how easy or difficult it is for you to own a property and also how productive or unproductive a city is in terms of capital value appreciation, explains Kapoor.
Bengaluru’s productivity is high both in terms of rental yields across city bands and so is the scope for capital price appreciation. In Vizag, on the other hand, capital values are not aligned to rentals. This could be due to the fact that urbanisable lands are lesser or speculation is high due to which rentals have not caught up, he says.
Niranjan Hiranandani, managing director, Hiranandani Group is of the view that buying or renting a house in a city depends on the job opportunities that are available in a particular area.
Dubai is expensive to rent a house compared to several cities in India but people still go there in search of better jobs, he says, adding the driving force behind buying or renting a house is definitely the price point but more than that it is to do with job opportunities and the quality of life. Both these factors are critical for people to buy or rent a house.
Cities like Kolkata may be cheaper, Bengaluru and Chennai may be reasonable and Mumbai and Delhi-NCR definitely more expensive but the driving force enabling people to flock to these cities is definitely to do with the availability of job opportunities in these metro cities.