Trying to decide if you should rent or buy? We look at how many months of rent you will need to purchase a home in some of India’s popular cities.
Living in a city has its own set of advantages. From job opportunities to gaining cultural knowledge and the chance to explore some of the most exciting places, cities offer a variety of lifestyle choices. But with these advantages come a price - or should we say the property prices.
The cost of a new apartment in a Tier-I city can easily be in the crores, especially if you are seeking a property in a well-developed/connected part of the city.
Off late there has been a debate about whether it is more financially prudent to pay rent or purchase a house with exorbitant EMIs. So, we decided to look at how many months of rent you would need to buy a house in the top 10 cities of India.
1. Mumbai: Mumbai is among the most expensive cities in the world. The cost of living is among the highest in the country, chiefly because of the presence of leading financial and industrial establishments, and the job opportunities in a city boasting a GDP of $310 Billion.
As per studies, with an average rental yield of 2.51%, studies indicate that it will take an estimated 478 months' worth of rent to own an apartment in the Mumbai Metropolitan Region (MMR).
2. Hyderabad: Home to an estimated population of 6.8 million, Hyderabad has IT, Biotech, Pharmaceutical, and other essential sectors contributing to its economic growth. It also has the most SEZs compared to other cities.
Hyderabad ranks as the second most expensive residential market in the country. With an average rental yield of 2.54%, studies indicate that it will take 472 months of rent to own an apartment.
3. NCR: The world's second biggest agglomeration, NCR includes the country’s capital as part of an impressive metropolitan area. One of India’s wealthiest regions, it houses fast-growing retail, health and telecom, and real estate businesses, making it a much-desired place to live in.
Nonetheless, NCR ranks as the third most expensive residential market in the country during Q3 2022. As per studies, with an average rental yield of 2.67%, it will take approximately 449 months of rent to own an apartment in the NCR.
4. Bengaluru: Bengaluru - ranked the fourth most expensive city in India - lies at the heart of India’s IT/ITeS sector, with world-renowned MNCs located here. The city also recorded the highest growth in the number of ultra-high-net-worth individuals (UHNWIs) at 17.1%.
At the same time, Bengaluru recorded the highest average rental yields at 3.64%, with studies indicating that it will take around 330 months of rent to own an apartment in Bengaluru.
5. Ahmedabad: Considered one of India’s fastest-growing cities, Ahmedabad, has been ranked the most affordable city in the country, since 2019. The textile, pharma, and automobile industries have been leading employers in and around the city, contributing to its economic development.
With an average rental yield of 3.10%, studies indicate that it will take 387 months of rent to own an apartment in Ahmedabad.
6. Pune: Traditionally acclaimed for its educational facilities, Pune also has a prominent manufacturing, IT, and automotive sector. Sugar and glassware are other significant industries in this belt, making Pune a much sought-after residential destination.
Notably, Pune retains its position as India's second most affordable housing market following Ahmedabad. With an average rental yield of 3.12%, studies indicate that it will take 385 months of rent to own an apartment in Pune.
7. Chennai: The city is ranked as the third most affordable residential market. According to realty experts, Chennai’s mixed economy and relatively low cost of living compared to other Indian metros have been attracting more and more people to relocate here. Consequently, the real estate market in Chennai has performed well in recent years.
Chennai’s thriving manufacturing and automotive industries and its growth as an IT and logistics hub with expansive and enhanced infrastructure has opened up tremendous job opportunities making it an ideal choice for relocation.
With an average rental yield of 2.35%, studies indicate that it will take 511 months of rent to own an apartment in Chennai.
8. Kolkata: A financial hub for East & North East India, Kolkata’s economy is also driven by mining, steel, cement, manufacturing, pharma, food processing, agri-businesses, and textiles.
Ranking as the 4th most affordable residential market, the average rental yield is 3.35%, and per studies, it will take 358 months of rent to own an apartment in Kolkata.
9. Jaipur: In recent years, not just the metros but Tier-2 markets such as Jaipur have emerged as growth engines of real estate. The city has, in recent years, attracted significant real estate investment after being designated as a smart city. It has also become a hotspot for IT/ITeS companies following the Start-up India Mission launch.
In addition to Jaipur being a centre of retail and tourism markets, these factors have fuelled interest in residential properties in Jaipur. Per findings, the average rental yield is 2.95%, and it is estimated to take 407 months of rent to own an apartment in Jaipur.
10. Indore: Indore in this list has clocked as one of the fastest-growing smart cities in India, with massive strides in the education, manufacturing, exports, and SME space. With reputed companies like TCS and premier educational institutions like NMIMS now present in Indore, the city's real estate market is expected to surge in the coming years.
With an average rental yield of 3.63%, studies indicate that it will take 331 months of rent to own an apartment in Indore. In fact, in the same study, Indore stands out as one of the most affordable cities.
In conclusion, buying a house in any of the top cities will require more than 20 years of rent. However, buying a house to live in is an emotional decision and not a financial one. If your goal is to buy a house for yourself it makes sense. But, if your plan is to buy a house for the purpose of investments it should be clear from this article that rental yields are simply not enough!
That's where Strata comes in! With Strata you can invest in high-yield, Grade-A commercial properties with an investment amount starting from 25 Lakh. With rentals yields over 8% and an IRR of 12-14%, Strata’s assets are an ideal alternative to residential investments.