Within What Timeframe Your New Home Can Pay off?

If you are considering whether to buy a property or just rent it out then there are a few factors that you need to consider before taking the decision the foremost being whether you have enough cash for down payment and whether you are eligible for a home loan. But if at all you feel that it takes ages for you to be able to buy a property which is the financially prudent choice always, rest assured you’ll be off in a few years. Take a look at how.

Currently, the India property online is at a boom where the property prices rise by almost 5 per cent every year. Keeping that in mind it won’t take long for your new home to pay off. According to a recent research, the buying decision of your property pays off if you just plan to stay there for at least two and a half years. And unless you are on a job that requires constant transfers, two and a half years is not a big time if you have a family to settle with. This figure of two and a half years is arrived at assuming that they won't be any dramatic changes in the real estate industry. Besides a lot of other factors have been considered that may or may not be applicable. Let us see the factors that have been while arriving at a figure of 2.5 years property pay off.

A comparison has been made between the property purchase vs. property rental for 3000 homes randomly picked up from different areas in the country and also from the property search sites in India.

The factors that were considered for buying the property included:

•    Down payment of 20%.

•    Equated monthly instalment for 30 years at the current interest rate for the people with a credit rating between 680 – 740.

•    Insurance, taxes etc. to the tune of 3 per cent of the property value.

•    8 % of the selling cost because precisely that is how one can realise his gains.

•    Annual maintenance cost to the tune of 1 per cent of the property value.

• Home appreciation forecasts as well as the tax that will be deducted by the government on the same.

The factors that were considered for renting out of a property:

•   One month’s rental as deposit.

•   Actual rent payment.

•   Insurance.

•    5% of the annual investment as gain which would have otherwise gone towards the payment of the down payment or other expenses that a homeowner has to undergo which is saved upon by the renter.

Making a calculation of all these factors for 3000 families, the break-even that was achieved was at a mere 2.5 years. In fact, for a few locations, it was even as low as 1.96 years. So if you are planning to stay at a place more than 2.5 years, beware you are actually shelling out more money. And after reading this if your mood changes and you decide to buy a property then there are a lot of real estate agents in India that can help you out with the same.