COVID-19’s Response to the Buy Vs. Rent Conundrum
At this point, does it make more sense to buy or rent a home? Many Indians who migrate to the urban centres ask themselves this question at some point. There are arguments for and against either option, but the debate has attained newer heights in the post-COVID-19 landscape.
Property supplements, real estate portals and others with ‘skin in the game’ espouse the benefits of buying – only to be dismissed by those who claim that in an uncertain job environment, homebuying sentiment cannot possibly be a serious compulsion.
Yet, homes are selling. As sales figures clearly indicate, people are quietly closing deals in a marketplace which has, counter-intuitively, been enabled by the COVID-19 crisis.
COVID-19 has polarised opinions on real estate like never before. As before, pro-renting advocates emphasise the arguments of flexibility, freedom of choice and reduced financial commitment. In the current time, they also add that renting is seen as the only choice for those who have lost their jobs or are in danger of doing so.
Curiously, there is almost no discussion about people whose jobs are secure, who have always wanted to own a home, and whose previous equivalence has now been eliminated by the pandemic. Many now choose not to face the future with such uncertainty again. If they were ambivalent about buying a home before, their minds are now made up, and they are acting.
While those who already own their homes in COVID-19 times are indeed fortunate, the pandemic also brings unique advantages for those seeking to secure the ultimate asset in the current time:
The first COVID-19 case in India was recorded on January 30, 2020. Since then, many investment indicators depicted a sharp decline for the next few months, eroding a significant amount of invested capital.
Those who are buying new homes are aware of these benefits, many of which are strictly time-bound. The COVID-19 pandemic is a once-in-a-lifetime event and the advantages it brings for homebuyers will not be repeated. The renting population will not thin out – it is clear that the pandemic has had many financial fatalities. For many, renting may be the only choice.
However, those with options are now playing for the long-term. Regardless of what else may happen in the future, home and hearth need to be secured while the odds are so unprecedentedly favourable.
*Considering the total annual rental outgo for five years + 3.5 per cent annual rental appreciation. E.g. in MMR, the average monthly rental outgo in city-limit areas is Rs 45,800. For five years, this equals nearly Rs 28.66 lakh (including standard rental escalation for this period). This is almost 52 per cent of the total average cost of a property in MMR's peripheral areas.
About the Author:
Santhosh Kumar is Vice Chairman at Anarock Property Consultants.