o buy or not to buy?
Tough decision that, unfortunately, has to be analysed (and eventually answered), by you alone.
And, make no mistake, the right answer will vary from time-to-time, place-to-place and person-to-person.
Profound? Not really.
A good approach is to take a quick look at your needs and your lifestyle in, both, the short and long run:
Renting is convenient...
In a professional hurry? Ready to pack your bags and move to greener pastures? Your driving passion is to sprint up the corporate escalator?
You can't think of tying yourself down to anything (a job, a home or a relationship). Everything is in flux.
That makes your decision a no-brainer.
Don't buy now.
You are too flexible and mobile.
For you, the advantages of renting far outweigh those of ownership.
Here's a sneak preview:
The paint is peeling? No problem.
The tiles are old fashioned? Who cares?
The geyser isn't working? A little inconvenient, but you can manage.
After all, what is dear old Mr Landlord for?
He will manage (and spend) everything. The poor man has no choice, does he?
You are just a lovely being in transit.
So put your feet up and relax.
You dislike Mr Agrawal, your intrusive, scowl-faced neighbor.
Relax. Just don't renew your lease.
In short, as a hip and carefree renter, you are free of the drudgery of ongoing expenses and maintenance.
...but not always smart!
Every rose has a thorn! Sad, but true.
If you want to throw a late night party with trance music pitched high, sorry. Landlord is just not going to approve.
The drab grey on the walls is getting to you. An electric blue is more to your palate. Sincere apologies.
And, Poochie, your absolutely divine pet mongrel, she just has to go.
Remember, you are in transit. No permanent changes and canine additions allowed in this space -- your landlord's space!
And what do you have to show at the end of your lease tenor?
A disgruntled landlord, the stresses of relocating again and tons of rent receipts!
You obviously haven't heard of wealth creation.
Maybe, just maybe, I should buy
Aha! Just because you don't like the colour on your walls and you are tired of packing boxes after 11 months does not mean you are ready for the long haul.
Financially, this will have a clear impact: You will need to produce liquid cash for the downpayment (home loan companies do not finance the full cost of the home).
This can limit or prevent other investment opportunities. In fact, a substantial portion of your savings will go here and so will a good part of your income, when you begin to repay your loan.
Suddenly, you will have a number of expenses, ranging from renovation to monthly outgoings to your society to loan repayments. Insurance of your home possessions may also feature on your list.
Gone are the days of picking up the phone and telling your landlord what's not working. Now, as the lord and master of your abode, the carpenter, electrician and plumber are your lookout.
Let's not forget the quintessential Sunday society meeting! Or socialising with your neighbours and returning their dinner invitations.
And, if you are sick with the lot of them, you don't have the option to leave effortlessly at the end of your lease. Selling is not such a good option (if you actually consider it one!).
So why is home ownership so high on everyone's wish list despite the obvious difficulties?
Because the tax breaks are great and a home is an excellent financial investment.
Most important, buying a home has a huge psychological impact on one's sense of security and privacy. It is a matter of pride.
Now, if you think the above is sentimental jelly, consider the following hard facts to arrive at your decision:
- How long do you think you will be living here?
- How much is the current monthly rent vis-à-vis the monthly payment to the loan company (EMI)?
- Do you think the rentals will increase next year (which will affect you)? Also, do you think the price of the house is also going to increase (which will benefit you)?
- How much do you think you will spend on maintenance?
Choose the option which is lightest on your groaning wallet.
When renters rent:
~ Their jobs may require them to move from location to location.
~ They might be thinking of shifting cities.
~ They may not have enough money for a down payment.
~ They may be unsure of where they would like to eventually live.
~ They may not want to be tied down right now.
How renters win:
1. They can shift within a city and between cities fairly easily.
2. They don't need to pay a huge down payment, just a security deposit.
3. Maintenance and repairs are not their problem.
4. They can probably stay in a posh locality they cannot afford to buy.
How renters lose:
1. They have no special tax breaks.
2. They do not stand to gain from the rising value of property.
3. They cannot rework the house to their liking.
When buyers buy:
~ They are clear on their budget and housing expenditure.
~ They are psychologically ready to take the plunge.
~ They are tired of 'throwing' away money on rent.
~ They have had it to their necks with obnoxious, interfering landlords.
~ They want a place to call home on their own terms and conditions.
~ They have saved enough for a down payment.
How they win:
1. They get all the tax benefits on taking a loan.
2. They make a fixed monthly payment towards their loan (EMI), and do not have to worry about increased rentals.
3. They have a place of their own.
4. They can make all the possible changes they would like to within the home.
5. Their monthly payments go to the loan company for their own home, not to a landlord for his home.
6. The repayment of the loan is a form of a forced savings in an investment (home), which is growing in value.
7. They can borrow against the home, once they finish paying off the loan.
8. They can take a top-up over the current loan if they need money.
How they lose:
1. They have to come up with a substantial amount for a down payment.
2. Moving out is not so easy anymore.
3. They have a loan to repay and that means financial immobility.
4. All repairs and maintenance will be their problem.
Don't get carried away by the economic aspect.
Buying a home is as much an emotional decision as a financial one. Home ownership provides stability and a sense of pride. You can't put a figure to either.
If you feel it is time to establish your roots and build a foundation in the neighbourhood and community, you know in which direction you are heading.
Illustration: Dominic Xavier
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