COVID-19’s Response to the Buy Vs. Rent Conundrum
Real Estate

COVID-19’s Response to the Buy Vs. Rent Conundrum

  • Home loan interest rates hover at 6.85 per cent – the lowest in decades.
  • 66 per cent of unsold homes are priced under Rs 80 lakh, and unheard-of deals are available.
  • Five-year rental outgo for tenants living within city limits equals 27-52 per cent of total property cost in peripheries of top cities.
  • 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:

  • Pandemic deals: The lockdowns have impacted sales and developers want to make up for the lost time and clear inventory. It is clear that the unheard-of deals available now are because of pandemic market conditions. As such, they will vanish once the crisis blows over.
  • Calculations favour buying: The buyers on the market now have done their homework. The five-year rental outgo for city living amounts to 27-52 per cent of the cost of a home in the suburbs of MMR, NCR and Bengaluru. This is a strong financial rationale for suburban homeownership.*
  • The need for autonomy: In the current context, people need homes that they can adapt to their requirements – and rented homes don't offer this flexibility. From a work-from-home perspective, the onus is no longer on small rented homes in the city centres whose landlords will not permit to be altered – it is on larger homes which can be adapted at a will.
  • Rock-bottom home loan rates: Homebuyers were hoping for lower home loan interest rates. The economic compulsions of pandemic-reduced consumption have pressed interest rates down to as low as 6.85 per cent – the best rates in decades. The repo rate to which home loan rates are linked is at a 20-year low:

  • The price is right: While inferior projects have seen distress-related price correction, it is now clear that developers of quality housing will hold on to prices that are already trimmed as low as they can get. When prices do not reduce even in a pandemic slowdown, they are evidently at their lowest best. Average residential real estate prices across the top seven cities have been range-bound for the past five to six years, and 66 per cent of unsold homes are priced under Rs 80 lakh.*


  • No new launches: New launches increase supply and thereby cause prices to reduce. However, there will be very few new project launches now as developers will focus on clearing existing inventory. The market will thus attain equilibrium in a few quarters and then become more developer-favouring. This means that prices will harden.

  • Hard asset in uncertain times: The COVID-19 pandemic has caused everyone to take a hard look at what they can fall back on when things go south. An owned home is freedom from rent, while rent is a recurring expense which does nothing but push the stop-watch ahead a month at a time.
  • Investment rationale: Living on rent does not help to create an asset, while homeownership does. Simultaneously, other popular investment asset classes such as stocks and gold are volatile and unpredictable in pandemic times. Housing retains its intrinsic value in uncertain times and eventually appreciates when times improve. Also, home loans come with attractive tax benefits. Rental housing doesn't.
  • 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.

    Home loan interest rates hover at 6.85 per cent – the lowest in decades. 66 per cent of unsold homes are priced under Rs 80 lakh, and unheard-of deals are available. Five-year rental outgo for tenants living within city limits equals 27-52 per cent of total property cost in peripheries of top cities. 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: Pandemic deals: The lockdowns have impacted sales and developers want to make up for the lost time and clear inventory. It is clear that the unheard-of deals available now are because of pandemic market conditions. As such, they will vanish once the crisis blows over. Calculations favour buying: The buyers on the market now have done their homework. The five-year rental outgo for city living amounts to 27-52 per cent of the cost of a home in the suburbs of MMR, NCR and Bengaluru. This is a strong financial rationale for suburban homeownership.* The need for autonomy: In the current context, people need homes that they can adapt to their requirements – and rented homes don't offer this flexibility. From a work-from-home perspective, the onus is no longer on small rented homes in the city centres whose landlords will not permit to be altered – it is on larger homes which can be adapted at a will. Rock-bottom home loan rates: Homebuyers were hoping for lower home loan interest rates. The economic compulsions of pandemic-reduced consumption have pressed interest rates down to as low as 6.85 per cent – the best rates in decades. The repo rate to which home loan rates are linked is at a 20-year low: The price is right: While inferior projects have seen distress-related price correction, it is now clear that developers of quality housing will hold on to prices that are already trimmed as low as they can get. When prices do not reduce even in a pandemic slowdown, they are evidently at their lowest best. Average residential real estate prices across the top seven cities have been range-bound for the past five to six years, and 66 per cent of unsold homes are priced under Rs 80 lakh.* No new launches: New launches increase supply and thereby cause prices to reduce. However, there will be very few new project launches now as developers will focus on clearing existing inventory. The market will thus attain equilibrium in a few quarters and then become more developer-favouring. This means that prices will harden. Hard asset in uncertain times: The COVID-19 pandemic has caused everyone to take a hard look at what they can fall back on when things go south. An owned home is freedom from rent, while rent is a recurring expense which does nothing but push the stop-watch ahead a month at a time. Investment rationale: Living on rent does not help to create an asset, while homeownership does. Simultaneously, other popular investment asset classes such as stocks and gold are volatile and unpredictable in pandemic times. Housing retains its intrinsic value in uncertain times and eventually appreciates when times improve. Also, home loans come with attractive tax benefits. Rental housing doesn't. 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.

    Next Story
    Resources

    Madhya Pradesh Champions Inclusive Tourism at Heritage Sites

    On the occasion of World Heritage Day, Madhya Pradesh is taking a significant step toward inclusive tourism by making its historical sites accessible to all — especially persons with disabilities. The state is rolling out its ‘Accessibility Infrastructure and Development’ project at Maheshwar, Mandu, Dhar, and Orchha, aiming to create a more welcoming experience at these iconic cultural destinations.The initiative, under the leadership of Chief Minister Dr Mohan Yadav and Tourism Minister Shri Dharmendra Bhav Singh Lodhi, includes infrastructure upgrades such as ramps, Braille signage, w..

    Next Story
    Resources

    Runwal Realty Onboards Sonam Kapoor as Brand Ambassador

    Real estate major Runwal has unveiled a refreshed identity as Runwal Realty, signalling a renewed commitment to crafting spaces that stand the test of time. With this refresh, the brand unveils its new philosophy: “Building for Generations to Come” and welcomes Bollywood star and global fashion icon Sonam Kapoor as its brand ambassador. This evolved identity reflects Runwal Realty’s commitment to creating not just homes, but heirlooms—crafted through visionary design, meticulous planning, global design expertise and an unwavering focus on quality. With the customer at its core, each de..

    Next Story
    Infrastructure Urban

    Emerging Trends in Infrastructure and Transport 2025: KPMG

    KPMG’s latest report, The Great Reset: Emerging Trends in Infrastructure and Transport 2025 edition, sheds light on the profound changes transforming the global infrastructure landscape. As industries adapt to the challenges posed by climate change, economic pressures, and technological advancements, the report identifies key trends and provides actionable insights for leaders in infrastructure and transport sectors. “In today’s interconnected world, the lack of standardized supply chain practices is not just an operational challenge—it’s an environmental and economic one. We’..

    Advertisement

    Advertisement

    Subscribe to Our Newsletter

    Get daily newsletters around different themes from Construction world.

    STAY CONNECTED

    Advertisement

    Advertisement

    Advertisement

    Advertisement

    Talk to us?