Rent vs. Buy - MATH
Time Horizon: How long you plan to stay is one of the most important factors to consider when making a rent vs buy decision. A good rule of thumb is that, you can opt for buy option if you intend to stay for more than 5 years.
Prices and Rents: Consider the previous trends in prices and rents in the chosen suburb.
Taxes: Income tax benefits need not be a standalone reason to buy a home, consider the city's municipal and property taxes too.
Down payments: If you plan to buy a home, you will need to shell out at least 20% of the property value to get a home loan. Consider your financial aspects before making a decision.
Buying a house in any major cities in India isn't cheap, a city like Bangalore, a decent 3 bedroom condominium can cost you at least 1 crore.
Let's say you plan to live in Bangalore for 5 years, try finding a rental property that's comparable to the property you're thinking of buying. Figure out how much it costs to rent annually.
Here's an example for a property in outer ring road Bangalore;
Cost of 3 bedroom condo - ₹ 1 crore
Avg. rent for a 3 BRM condo - ₹ 25000 per month, you're spending ₹ 3,00,000 per annum which is just 3% of ₹ 1 crore. In this case, renting looks much cheaper than buying.
If the percentage is closer or higher than 5 % ( annual rent of ₹ 5,00,000 or higher), the decision on whether rent or buy depends on individual factors, such as your risk appetite or how long you plan to stay.