Study indicates renting a house is better option in Delhi

'Better to rent a house in Delhi'

According to the Makaan Buy versus Rent Index, it is better to stay rented in subcities of Delhi East, Delhi North, Delhi South, Delhi West and Dwarka, than buy a house.

  • New Delhi,  March 30, 2011  
  • |  
  • UPDATED   10:48 IST

For all those looking to buy a house in Delhi or Mumbai, a new report by property portal has a word of advice - with property prices having soared past the pre-slowdown highs it is cheaper to stay rented in these metropolises than to purchase a house for now.

However, for those planning to buy a house in Chennai, Ahmedabad or Bangalore, it is the right time to do so, as buying a property is a better option in these cities than to stay rented as the rentals in these places are higher or closer to the equated monthly installments (EMIs) of housing loans that go towards buying a house.

According to the Makaan Buy versus Rent Index (MBRI), it is better to stay rented in the subcities of Delhi East, Delhi North, Delhi South, Delhi West and Dwarka than to buy a house in these localities.

These sub-cities have an MBRI value of above 25, indicating that it is much more expensive to buy a house in these areas than to stay on rent.

The MBRI takes into account several factors, including average capital value of property, average rental value, rental yield, historical capital price movement, historical rental movement and inflation.

A low MBRI (1-20) indicates that it is much less expensive to buy a home than to stay on rent whereas a high MBRI (25 and above) denotes that it is much more expensive to buy a house than to stay on rent. MBRI has been collated both at the city and sub-city levels.

The report tracked the MBRI in 32 property micro-markets of Ahmedabad, Bangalore, Chennai, Delhi-NCR, Hyderabad, Mumbai and Pune between the months of January and March.

However, according to the report NCR sub-cities of Noida, Gurgaon and Faridabad are recommended for buying property rather than renting as the property rental yields are higher compared to the property valuation in these pockets.

The sub-cities of Ghaziabad and Greater Noida have emerged as neutral areas.

"A property seeker today is confused between opting for a rented accommodation and giving that rental amount as the EMI for buying a house. MBRI will empower him with research-based analysis," said Aditya Verma, chief operating officer (COO),

"The property prices in Delhi and Mumbai have gone up considerably. Even as the recent months have seen sales falling considerably, many developers are holding prices. We have seen correction in Ghaziabad and Greater Noida property prices by up to 15 per cent," Sumit Rastogi, consultant at Axiom Estates told MAIL TODAY. Brokerages said that even when residential rentals have appreciated in most areas of Delhi and Mumbai it is still lower than the EMI that a person has to pay to buy a house.

"If you are looking for a two-BHK flat in Dwarka, the quoted rates start from Rs 70 lakh. However rentals are still in the range of Rs 10,000-12,000. It is still profitable to stay rented than to invest in buying a house even if you take into account the property appreciation in the next five years," Rastogi added.

Courtesy: Mail Today