Three reasons why renting a home is better than owning a home

The home rental market in India has been gaining traction steadily over the years. Considering the high property prices in most metro cities, buying a house is still a financial undertaking that could prove to be taxing on the funding resources of an individual.

On the other hand, renting a home within the city is still quite affordable, as annual rentals are just 1-3% of the value of the property. In this regard, one of the most attractive advantages that renting instead of buying a home is that an individual gets a wide choice of locations and the flexibility to relocate if needed.

Renting a home is a better option

We would look at someone taking property on rent as an individual who wants to postpone the decision of buying a house immediately. If there are expenses envisaged such as funds for child education, which would erode the savings significantly, or if one is not sure about the stability of a job and location, if one wants to start a new business in the near future, then taking a property on rent remains a good proposition. Similarly, for people who relocate to a metro city, it is in their best interest to stay on rent for a year or two before deciding on buying a property. Ideally, as a thumb rule, a tenant should not spend more than 25-30% of the household income on rent.

Maintenance of the property, which can be recurring in nature is another cost factor. These can be property tax, regular repairs, and society maintenance charges among others. As a tenant, an individual doesn’t need to worry about such cost heads.

A better option could be that, if an individual decides against buying a home, they can instead invest the funds which would have gone into paying equated monthly installments (EMIs) into financial products for better returns, while staying in a rented accommodation that does not pinch their pockets as much as an EMI would do.

(The writer is the CEO of Reliance Home Finance. Views expressed are personal)