Mumbai, Delhi Most Expensive For Buying/Renting Residential Property: Report

On the parameters of buying and renting a residential property, Mumbai and Delhi are the most expensive cities in India. But when it comes to rentals, Chennai and Pune are mostly affordable. On the parameter of buying a residential property, Hyderabad and Ahmedabad are the most affordable. City of joy Kolkata is a paradox where rentals are expensive when compared to purchasing a residential property priced over Rs 15 lakh. These are the findings of the Annual Buy Vs Rent Report (ABRS) report of ArthaYantra Corporation, world’s only full-service robo-advisor.

In a press release, the company said ABRS creates an objective method for families to arrive at answering their Buying Vs Renting question from a personal finance perspective, while keeping emotions out of it. The report covers real estate buy and rental markets in eight cities across India: Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata, Mumbai and Pune, it said.

"ArthaYantra developed a patented composite score "ArthaYantra Buy Vs Rent Score" (ABRS)™ to quantify Buy Vs Rent decision and also explain the reason to buy or rent in a particular city. It uses a host of parameters including, salaries, taxation and prices to arrive at a recommendation," the company said in the press release.

It said ArthaYantra’s research addresses important consumer questions like How much more money does a professional need to shell out for buying a home compared to renting it? Or at what salary level should a professional buy a property and at what salary level should a professional rent a property?

According to Nitin B. Vyakaranam, CEO ArthaYantra, “From the findings of 4th edition of ArthaYantra Buy Vs Rent Report (2016), Mumbai and Delhi remain the most expensive cities for both buying and renting a residential property. While Chennai and Pune are mostly affordable for rentals, people with an annual income of INR 10 lakhs and above may consider buying a residential property in Hyderabad and Ahmedabad. Of all, the city of joy Kolkata is a paradox where rentals are expensive when compared to purchasing a residential property priced over INR 15 lakhs”

Most Expensive: Delhi & Mumbai
As per the report, someone with an annual income of Rs 25 lakh cannot afford to buy a residential property in Mumbai. "Therefore, it is most suitable city for renting a house," it said. On Delhi's residential market, the report said: "The capital city has seen rental values increase by 20 per cent over the last four years, while average buying prices have increased by 9.1 per cent for the same period. Buying a property here is only suitable for people with an annual income of Rs 25 lakh," it said.

Most Affordable: Hyderabad & Ahmedabad
The report says Hyderabad and Ahmedabad are the most affordable cities when it comes to buying a residential property. "Rents in Hyderabad have seen an increase of 6.3 per cent over the last 4 years while residential property prices have dropped by 10.46 per cent over the same period. Anyone with an annual income of over Rs 9 lakhs can consider buying a residential property here," the report said. On Ahmedabad, the report said it continued to remain an affordable city for both buying and renting a residential property as the real estate market is growing at slow pace. "People with an annual income of Rs 10 lakh and above can consider buying a residential property in Ahmedabad," it said.

Moderate: Chennai, Pune & Bengaluru
The report terms Chennai as the third most expensive city after Mumbai and Delhi on the parameters of buying a residential property. Chennai, as per the report, has witnessed an increase in the prices of residential properties by 8.78 per cent as compared to last year. However, when it comes to renting properties, the rates in Chennai, as per the report, have dropped by 1.7 per cent compared to last year making Chennai favourable for renting. "Buying a property in Chennai is only suitable for people who have an annual income of over Rs 20 lakhs," it said. But when it comes to Pune, there has been a lot of demand for both buying and renting a residential property, the report said. This is because there has been an upswing in the property prices as compared to last two years, it said. "People with an annual income of above Rs 17 lakhs can consider buying a residential property in Pune," it said.

Bengaluru, the report said, continues to be favourable for renting rather than buying, even though average property rents have increased by 10.08 per cent. The garden city is an affordable buy destination for people with an annual income of Rs 16 lakhs or above, it said.

Explaining the methodology in preparing the report, ArthaYantra said that data was captured from multiple sources like from National Housing Board (NHB) of India, available real estate reports and major real estate aggregators. "The methodology used for arriving at the results considers various key parameters derived from the initial data collected which include price of the residential property, rental values, years of saving for accumulating down payment, initial security deposit amount while renting a property and lastly the purchasable area (number of square feet) per Rs 1 lakh.

As per the report, on the basis of cost per 1,000 square feet, Mumbai (Rs 1.91 crore), Delhi-NCR (Rs 1.18 crore) and Chennai (Rs 75.6 lakh) emerged as very expensive cities for buying, whereas the rentals have undergone a marginal change for the past two years, the report said With rising inventory levels in these cities indicates that the supply that is available is unaffordable to many. So, people are left with renting as an option over buying, it said.