A seasoned, second-generation developer voiced concerns about misleading journalism affecting home buyers. Speaking from the deck of his corporate yacht off the Gateway of India, he pointed to the skyrocketing costs of land, materials, and labor. He left out mentioning the increasing profit margins, though.
"With all input costs rising, how can real estate prices go down?" the developer, dressed in a designer suit, questioned. He worried that reports suggesting a potential drop in realty rates could delay buyers' decisions, ultimately forcing them to pay higher prices later. "Do they have a choice?" he pondered.
Certainly, they do. People can opt out of buying entirely and choose to rent instead. Take the example of a friend who owns a 1BHK apartment in Seawoods, New Mumbai, and has been planning to upgrade to a larger home. A 2BHK in nearby Seawoods Estate costs upwards of Rs1.4 crore. Even after selling his current flat, he would need a Rs1 crore loan, resulting in monthly installments of at least Rs1 lakh.
However, the monthly rent for the same apartment is just Rs20,000—a savings of Rs80,000 every month, not to mention avoiding the stress of servicing a massive loan. Buying your dream home and losing sleep over it would be a pity.
In times of fluctuating careers and job stability, locking into a substantial home loan might not be the best idea. Renting could be a smart move, leaving aside complex calculations and the belief that real estate prices only go up. Renting provides flexibility to move to a new address or city, and you keep money that would otherwise go towards loan interest.
The concept of renting isn't new. Many in Western countries and even Mumbaikars, until 25 years ago, lived in rented homes. Owning a home was a lifetime achievement. Home loan companies didn't exist back then, and few had the means to buy a house.
If more Mumbaikars choose to rent, the developer on the yacht may face challenges repaying creditors and affording that anchored yacht.