Cracking Rent vs Buy, the classic personal finance dilemma

Cracking Rent vs Buy, the classic personal finance dilemma

In India, the average rental yields are 2.9%, among the lowest in the world



According to a recent study by Moneycontrol and Liases Foras, the number of months of rent required to buy a home in India ranges from 330 in Bangalore to 606 in Vizag. The corresponding number for Mumbai is 478, for NCR: is 449, and for Kolkata: is 358.

Rental yields — rent divided by property value — is very low in India. The table below translates the same into rental yields across different cities.

Property prices in India

In India, the average rental yields are 2.9 percent, among the lowest in the world (derived from the above study), in comparison with the USA, Canada or cities such as Dubai, where they are much higher, at 5-6 percent.Many articles on Rent v/s Buy favour renting rather than buying using the following rationale:

Rent paid is a fraction of the first year EMI of a home loan.The differential amount (EMI minus Rent), if invested over a period of years, will provide returns far greater than the property value.

However, a property, unlike other asset classes, has a very long life of more than 30 years. As with any other make