Should you rent a house or should you buy one? Is it better to pay EMI than pay rent? Well, the answer cannot be simply a ‘yes’ or a ‘no’; the argument continues and there is merit in both the views. The choice would depend on a variety of factors unique to every person’s life. Here is a deeper look into both the options, with the objective of choosing the one that best fits your case.
Why renting is good
- Residential space rents are typically in the range of 3% of the capital value of the house. So it is relatively inexpensive to rent a house. Of course, this argument ignores the appreciation potential of real estate.
- No hassles of maintenance or renovation. It is the house owner’s responsibility to carry out these activities.
- Better mobility. In these times of opportunities for employment and related reasons available across geographies, both within the country and abroad, renting makes a better choice as one can move seamlessly to a new destination without worrying about leaving the house behind or selling it.
- Tax exemption on HRA. When you actually pay rent, you get an exemption on the House Rent Allowance (HRA) that your employer pays you. If not, the whole of the HRA becomes taxable.
Why buying is good
- Peace of mind – No landlord, no lease agreements, no rent negotiations, no home hunting every few years etc. When the roof over your head is your own, it takes away a lot of hassles from your life and provides a measure of certainty.
- Security and satisfaction – The pride of owning a home is matchless. It is a sign of financial accomplishment. Even when life is not playing out to your liking, you have an abode of your own to turn to.
- Tax benefits – Home loan repayments fetch you tax breaks which lowers your overall cost of home purchase. The two major tax benefits in home loans are:
- Section 80C: Your home loan repayments are eligible for a deduction of up to Rs.1.50 lakh per annum. This means you can deduct your home loan principal repayment up to this amount from your taxable income and thus save on tax.
- Section 24: This section provides you with a tax exemption on your home loan interest payment. For self-occupied houses, interest payments of up to Rs.2 lakh can be claimed as an exemption from your taxable income. But if the property has been rented out, the full interest payment without any upper limit can be claimed as a deduction from taxable income, thus providing you with substantial tax savings. This benefit is available on interest payable even if not actually paid during the year.
- Better application of your hard earned money. Paying rent does not fetch you any enduring asset. But if the same amount is utilized towards home loan EMI payments, it slowly but surely builds you an asset in the form of a home.
- Scope for better returns. Real estate assets generally appreciate over time and tend to deliver inflation-beating returns over longer time frames. Even while you are paying your EMI, your house would have gained in value, thus providing growth to your wealth.
End note:
Rent or buy is a very individual decision, depending on your financial situation and preferences in life. But given the incentives and appreciation potential of real estate, you would do well to buy your own little heaven on earth. After all, the money you pay becomes the building block of a permanent mark of peace, security and accomplishment in your life rather than being frittered away as rent.
PNB Housing Finance offers its clients a dynamic range of fixed and floating rate. We are also happy to let you know that we process your loans within 7 days as we understand that the sooner you own your dream home, the better.
