Most Indians have the ultimate dream of buying a house, and affordable housing is one of the biggest challenges facing young professionals today. Most people compromise on this thought by staying in a rented home.

Buying vs. Renting, you must make an informed decision by researching. But is buying a property in 2022 profitable? Or is it better to stay on rented a house?

Here is everything you need to know about owning a house vs rental housing in 2022

Suppose a property's starting value is assumed to be ₹ 40 lakh. So let us look at how the financial situation will unfold if one decides to buy or rent a property. 

Renting a house

If you decide to live on rent, the rent will be approximately Rs.10,000 per month. This cost will increase after a lapse of every 11 months. Total rent paid for 25 years, including a 10% increase in rent, is ₹ 1.18cr. 

Buying a house

When you decide to buy a house on loan, Rs.10 Lakhs would be needed as a downpayment and a loan of ₹ 30 lakhs for 25 years at a 9% interest rate. The total of EMIs will be paid in 25 years is Rs.76 lakh which is simply ₹ 25,176 every month. Paying EMI is almost 2.5 times that of renting per month. 

"Does that mean paying EMI and buying a house is a wiser decision than paying rent?"

No, paying home loans can be a significant burden for a middle-class person, and the cost difference of 2.5 times is too high. They would instead save those differential Rs15,000 and downpayment by staying in a rented house to lead a more lavish lifestyle. For instance, Rahul is a young professional who often needs to change his jobs and cities. Buying a house can be cumbersome for Rahul because he needs to keep moving. Thus, buying a house is not an easy decision to make.

To get more clarity, let's look at the alternative approach.

The house's value after 25 years, considering 10% per annum appreciation, will be ₹ 4.33 cr. And Total rent paid for 25 years, including a 10% increase in rent, is ₹ 1.18cr.  

The point is that the cost difference between rent and EMI will always be there, and this difference makes a significant difference in wealth. It is more likely that the Rent vs EMI ratio will increase with time. 

Also, home loans provide Tax advantages such as the Pradhan Mantri Awas Yojana (PMAY), the reduced home loan interest rates under the Credit-Linked Subsidy Scheme (CLSS), and the Real Estate Regulation and Development Act 2016 (RERA). Income tax rebates up to Rs.5 lakh and the revised GST have enhanced home buying sentiment in the country.

However, the real difference in wealth is likely to be higher, and it is preferable to buy a property for oneself rather than rent a house if there are no crucial difficulties. 

So, it becomes essential for people to know how to maintain a balance between their lifestyle and buying a house. 

The bottom line

Regardless of your perspective on the "rent or buy" dilemma, the choice is ultimately personal. Renting isn't always "throwing money away," and buying a home isn't always a wise investment. The most important thing is to decide what is best for you and it totally depends on your financial situation, lifestyle, and personal goals.