While Indians have traditionally preferred the stability of home ownership, millennials and Gen Z often prefer the flexibility of renting.
Estimate the total cost involved in buying versus renting a house. Always remember that rent is just an expense, but home loan EMIs are an investment in building an asset.
If you rent a house, you'll feel the effects of inflation in the form of rising rent every year. On the other hand, when you buy a house with the help of a loan, you'll have to pay interest on it. Estimate the rate of inflation versus interest rates over the next 15-20 years, to calculate which rate is lower, and thus more economical.
It's important to be clear about your priorities. If self-use is your objective, you’ll naturally shift toward buying. Your home will also be an appreciating asset. However, if your focus is more on investments, you’ll still have to figure out accommodation in the short-term.
Do you plan to live in the same city or country for some time, or are you planning to make a move to an another country? Your decision should be aligned with your future plans, and renting might be better if you do not intend to stay for long.
A home loan is a long-term affair that requires regular repayments. If the EMI is higher than your likely rent, make sure you can afford it before you choose to buy.
Evaluate other investment options and the potential returns they can generate. Other liquid assets such as mutual funds and fixed deposits can help you build a well-diversified portfolio. Compare all these options against parameters such as return potential, risk quotient and liquidity to see if there might be better investment avenues than buying a house.
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