Buying a Flat in Kolkata is Wiser than Renting One

Posted On September 5, 2018 by

Buying a home is perhaps the most common and the biggest decision we make in our life. It involves a high level of planning; but at the same time, the decision has to be prudent, and backed by financial viability. Quite obviously, a bad decision will lead to financial distress with debt overload. In spite of this fact, people choose to buy a flat instead of renting it out, if they are staying in Kolkata.

The Primary Reason

With the Union Government’s proactive measures to provide affordable housing for all by 2022, significant impact is felt on the home loan interest rates. The rates are currently stable, thus making housing more affordable and lucrative. Moreover, the real estate market in Kolkata is quite affordable when compared to other metro cities, which is also a key reason behind the preference of buying a flat than renting one.

Here are some key parameters that will help you determine whether you should pay monthly rent or buy a flat in Kolkata and pay monthly EMIs.

  • Property Cost vs. Rental Value

Over the past few years, there’s a significant price change in the residential housing segment across India, says the current statistics of NHB Residex. Kolkata is not an exception. The most noticeable aspect of the latest NHB Residex is the inconsistent ratio between the property cost and its corresponding rental value in the metro cities. However, the average residential property price in Kolkata is less than that of Bengaluru and other metro cities across the country. Considering this perspective, buying a flat is undoubtedly a better option in Kolkata than renting out a flat.

  • Rent to Buy Ratio

This is determined on the basis of monthly payments that you have to pay as EMI for buying a flat and the monthly expenses of taking an accommodation on rent. The ratio is calculated according to the monthly average cost of ownership (EMI + Maintenance) and the average monthly spends on renting (Rental + Maintenance). Rent to buy ratio basically determines whether or not the property value is being translated into rental value.

According to various surveys, Kolkata’s rent to buy ratio is highest among the Indian cities. It means the metro city of Kolkata is a great destination for property investment rather than rented accommodation. Check out the upcoming flats in Rajarhat New Town to find your dream home for investment.

  • Rental Returns

Rental yield is the ratio between the property cost and its annual rent. For example, if a property value is Rs.50 Lakhs and the prevailing monthly rent for the property is Rs.15, 000, the rental yield calculation will be as follows: Annual Rent = 15,000 X 12 = Rs.1, 80,000

Rental Yield = Annual Rent/Property Cost, which in this case is – 1, 80,000/50, 00,000 x 100 = 3.60%.

With such a higher rental yield it’s quite obvious that buying a property often makes a better decision than renting out a property in Kolkata.

The Prime Takeaway

Considering from these perspective, buying a property is the most viable option in Kolkata as it would yield high rental returns in the long term ( if you want to rent out your flat after buying).