07 December,2024 09:14 AM IST | Mumbai | Arpika Bhosale
Mumbaikars have been at a crossroads about renting versus buying especially since the pandemic
You don't know when you will have to move out of the house," says Nikhil Kamath in a video podcast called @NikhilKamathClips, "and not having the nuisance value of âhaving to move' felt like it made sense that you should buy." A seemingly innocuous statement, and common sentiment among the older generation, but one that bit Kamath back, metaphorically, as it contradicted his previously held convictions on the topic.
In April 2023, when a real estate market research reported 13 per cent rise in rentals in Mumbai in 2022-23, from 2021-22; and 57 per cent in Bengaluru, Kamath's X reaction was: "Looks like a short-term phenomenon; as long as you can #rent at three per cent and #housing loan rates are over eight per cent, this won't work. If I had to bet on house prices going down vs rent going up to reach equilibrium, my bet is still on the former."
For many young and impressionable people in the startup/business space, who hang on to Kamath's every word, it was a sucker punch. "Nikhil Kamath has bought a house, after advocating for so long how renting is the best; only fools buy property. So let this be a lesson to everyone who listened to him or any other finance bro and based their real estate decisions on rubbish reels," posted Sonali Thakker Desai (@SonaliThakker) on X.
On a Reddit thread unimaginatively named "Nikhil Kamath", are some pro-Kamath responses too, like, this one by TroglodyticDreamer: "Honestly, his advice makes sense for a ton of people! Renting or buying a house is subjective based on various factors, and for him, buying might make sense and for others renting might. What's the fuss all about?"
While the buying versus renting conversation sprung from Silicon Valley, almost two decades ago. The logic espoused by newly rich tech/business gurus was that one could rent a larger and fancier home - than one they could afford to buy. You could also afford a more opulent lifestyle with the money saved from paying EMIs. They also held that buying property pinned them down to a geographical place, limiting their agency to move cities for better job opportunities.
The philosophy gained serious traction in India post-COVID. Dhiren P Doshi, who owns a real estate agency out of Borivli West, gives us a bit of context to the conversation. "If someone is here [in the city] for a short period, and if their house rental allowance [HRA] is good enough for them to rent out a home, then it makes sense," he says.
Most Mumbaikars who can afford to buy a home are over 30 years of age and married.
Eeshanpriya MS, a former journalist who is now a consultant, says, "An EMI is always better than rent. While you spend almost the same amount of money every month, an EMI brings ownership of property," she says emphatically. The 35-year-old and her spouse have been paying close to R60,000 as rent at Shivaji Park for about three years. When they decided to buy property, they didn't want to move too far away from their immediate family or social circle. "Buying a home was also an aspirational decision for us. Buying property is one of the key factors for anyone to progress and move ahead in life," she says. "Owning a home gives us a chance to design our lives exactly the way we want. A rented home does not give you the option of permanent decorations or designing - we cannot even build storage sections in our rented house. It has also brought a sense of stability and security. Knowing that we won't have to disrupt our living from one rented home to another that... is a relief. Besides, moving ahead, I would not like such disruptions in the lifestyle of my future family - schools for my children, parks, extracurricular activities, are all tied to your residential locality, and these need a sense of permanence," she adds. The couple awaits possession of their new home in Sion, due in 2025.
Doshi he admits this is the profile of 70 per cent of his clientele. "Post-pandemic, there was a shift in how people, especially the youth, feel about buying a home," he says. "Earlier, they believed in salting away money in their youth to be able to buy a home, loan-free, in their 40s or 50s. But if only life were so linear: for health crises and marriages, people dip into their future home fund and lose precious time when they could buy a home within a manageable loan instalment."
What do real estate data lovers say? Vivek Rathi, National Director Research, Knight Frank India, says, "We do not track rental data, but in property registrations, Mumbai city demonstrated a robust trend, achieving the highest registrations in the January-October period in the past decade." They counted 1.8 ;more registrations between January and October 2024 than in 2022-23 in south Mumbai to Mahim, a 13 per cent year-on-year increase.
Appreciation rate of real estate is the biggest pull to buy a home; and the sense of stability it brings in times of severe unrest cannot be underplayed. "Rising prices create an expectation of continued value appreciation," says Rathi, "providing satisfaction of owning an asset likely to yield significant returns. It shields buyers from the uncertainties of rental markets, such as hikes or relocations. Despite increasing property prices, stable interest rates on home loans and attractive schemes from developers have encouraged buyers to take the plunge."
This is demonstrated by the case of Priyanka Pereira, 40-year-old founder of Phantom Words, a digital media company, who bought the home she had been renting out for the last eight years in Goregaon this April. "The landlord told me he wanted to sell the house and that I should move out," says the Mangaluru native who moved to Mumbai in the early 2000s. "I have been on rent since 2002 in various places, so when the news [of her current apartment going up for sale] came, it was fortuitous. Also, the instalment payment now is not even a 50 per cent hike over the rent I was paying. I knew that if I tightened my purse strings, and got a bit more organised, it was highly doable." Then comes the clincher. "The prospect of moving again was just too stressful. To go through it all over again is a task most renters understand," she says.
