The views expressed in this post reflect those of the Guest Author
मेरा अपना घर होगा! (I’ll have my own house!)
We are subconsciously raised to manifest this wish. For years, I too found myself to be in the same boat. But, I changed my thinking once I understood the pros and cons of Renting Vs Buying.
Being a Certified Financial planner, who is married to a Financial Consultant, we’ve been living in a rented house for 12 years. Yes, you read it right! And, we do not plan to invest in buying our own house for at least 5 more years. Let me tell you more about why we took this decision and how it has worked for us. And, also share a few pros and cons for you.
Here are 2 reasons why we took this decision:
- We stay in a house that is worth 2 Cr for a rent of 25k (can you calculate the %). Why would I buy a 2 Cr. house if I can stay in that for rent, right? And of course, the balance of the amount, which we might have ended up paying as the EMI of the home loan, we are investing that amount.
- We surely want to have our own house, but without the tensions of loans attached to it. We do not want to pay the interest on a home loan equivalent to the principal amount. This is why; we decided to buy a house when we can buy at least 70-80% of the liquidity.
Which is Cheaper: Renting vs Buying a Home?
I feel, owning a house is like raising a child! And, let’s be honest, in the current economy this is not that easy. Renting a house seems a little cheaper than owning one, as owning it calls for renovations, tax, and other expenses.
Of course, we are made to believe that owning a house is an Asset. But what kind of asset is it for you and how you want to use it, is something you must know. If you are living in the house, it is a used asset; and if you let it out to generate income then it is a financial asset!
Is it Renting or Owning a House a Better Option for Single Women?
From my perspective, if you are a working single professional, I would recommend living in a rented space to avoid some of the necessary expenses.
Apart from expenses, another con related to buying a house is that it ties you to that location. If you are a working professional, with a growing career and maybe in a profile where lucrative opportunities can take you to different cities or countries, then why have a real estate investment that will tie you down or limit you. Instead of this, isn’t it better to have financial stability with a diversified portfolio.
If you want to have real estate for your financial security; I would suggest that you invest in commercial property, which can generate passive income for you as well.
What are the tax benefits in India of Buying vs Renting, especially for women?
Taxes are not a delicious piece of cake, and you shouldn’t forget to factor them in your decision-making
For homeowners: If you take the home loan you may claim a tax deduction of U/S 80C for the principal amount and U/S 244(b) up to INR 2 lac on the interest you pay. In addition, there are now other benefits to claiming stamp duty and registration charges for Women in most States.
For renters: You may claim an HRA deduction from your salary if you are earning livelihood by employment.
When it comes to Rent Vs Buy, here’s what I will suggest you to consider:
The most important factor to be considered while buying real estate is:
1. It doesn’t offer liquidity as a diversified investment portfolio would do.
2. It is a used asset if you want to invest in real estate- invest in the property which can generate passive income and can help you generate a corpus to buy used assets from that asset.
3. It binds you as you are not able to relocate easily.
Till then, keep shuffling home when you get bored of one. And, always consider the opportunity cost whenever investing in any of the financial vehicles.
To sum it up, I am used to hearing “When will you buy a roof for yourself?” I believe I am living a life in a house that is of my choice without paying unnecessary expenses. For me living in a rented space gives you the option to choose your house, and invest money to generate wealth without the headache of paying some mandatory expenses which I would have to pay if I buy a house.
Having said that, I have invested in real estate in a form that can generate passive income for me to help me buy my house without a home loan. After all, real estate or home should give you relaxation- not a boundation, right?
Also Read: 5 Expert tips to help small women entrepreneurs build better relationship with business finances
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Meet our Guest Post Author: CFP Diksha Sethi, is the founder of Penny Pathshala, whose vision is to empower every individual and kid with money management skills. She is a freelance trainer specializing in Financial Literacy and Behavioral Communication Skills.