Buy Vs Rent Research Report Chennai-2013

01 April 2013 Written by 

 



Property cost vs Rental Value: The Residential Property prices in Old Mahabalipuram and Porur are not being translated to their rental value. Though the average residential property values of Tambaram is higher than Old Mahabalipuram Road by 16%, the average rental value is less by nearly 32%. The same case goes with Chromepet and Porur. Though their average residential property values are identical, their average rental values differ by nearly 32%.

Down payment: The years of saving required to afford the initial down payment i.e. 20% of the property price determines how sooner we can buy a house. It takes at least 4 years to save for the required corpus in Medavakkam, Tambaram, Porur, Kolathur, Chromepet and Old Mahabalipuram Road. In Sholinganallur and Perambur it takes 5 years, in Ashok Nagar it takes 7 years and in T. Nagar it takes 8 years. In Anna Nagar and Adyar a professional has to save for at least 9 years to afford the down payment amount required. In Chetpet it takes 10 years to save for a house.

Area: The average number of square feet per INR 1 lakh determines the amount you need to pay for the desired area of occupancy. The average number of sq ft of 28.90 per INR 1 lakh in Old Mahabalipuram Road makes it the place where you can get the highest area for the same amount of money compared to other 11 localities. This implies that for a given price one can get the largest space in Old Mahabalipuram Road followed by Tambaram, Medavakkam, Porur, Chromepet, Kolathur, Sholinganallur, Perambur, Ashok Nagar, T. Nagar and Anna Nagar. Adyar and Chetpet offer the least in terms of space.

Rent to Buy Ratio: The ratio compares the monthly cost of renting house to the monthly cost of owning the same place. The ratio undermines the necessity and urgency with which the house has to be bought. The rent to buy ratio of 0.52 shows that the rental values in Old Mahabalipuram Road are higher and makes it an “immediately buy when you can afford” place. The ratio of 0.32 in Tambaram gives ownership of house an advantage over renting.

Annual out of Pocket Costs: The annual out of pocket costs in case of ownership include the monthly EMI being paid including the maintenance charges and the amount of tax being paid. The values have been calculated and compared across the average loan tenure of 15 years. The year at which the annual costs match determines the minimum stay period in the house. The minimum stay period is 9 years for Old Mahabalipuram Road, 15 for Tambaram, Medavakkam and Chromepet and above 15 years for T. Nagar, Sholinganallur, Porur, Perambur, Kolathur, Chetpet, Ashok Nagar, Anna Nagar and Adyar. The tax benefits received under the HRA allowance dominate the tax benefits received in case of ownership over the period of 15years.

ArthaYantra Buy vs Rent Score: ArthaYantra Buy vs. Rent Score (ABRS) not only aids in making the rent vs. Buy decision but also explains the affordability and need to buy or rent in a given place. The three important factors on which scale is based are: affordability to rent, affordability to buy and a comparison of rent and EMI.

Adyar:The second highest in terms of average property prices. The rent to buy ratio of 0.2 meant that the average rental value of residential property is very less compared to its higher prices. Renting is the best option.

Anna Nagar:A rent to buy ratio of 0.20 and high property prices makes it a place to Rent.

Ashok Nagar:A rent to buy ratio of 0.26 and moderately high property prices makes it a place to Rent.

Chetpet:The place with highest average rental value and average property price. The rent to buy ratio of 0.24 meant that the rental prices are high and it is advisable to buy. But the higher property prices and least number of sq ft per INR 1 lakh (among the thirteen localities) makes it a place to rent.

Chromepet:The rent to buy ratio of 0.31 meant that the rental prices are moderately high and it is advisable to buy. The number of years required in order to save for down payment (4 years, which is least among the twelve localities) and the property prices being in an affordable range make it an affordable locality.

Kolathur:A rent to buy ratio of 0.27 and moderately high property prices makes it a place to Rent.

Medavakkam:The rent to buy ratio of 0.32 meant that the rental prices are moderately high and it is advisable to buy. The years required to save for down payment (4 years, which is least among the twelve localities) and the property prices being in an affordable range makes it the third most affordable locality (out of the thirteen).

Old Mahabalipuram Road:The rent to buy ratio of 0.52 meant that the average rental value of residential property is high compared to the average property price. This makes Old Mahabalipuram Road a place to buy. The moderate prices and decent number of sq ft per INR 1 lakh make it a place where in you need to buy a house as soon as you can afford it. The out of pocket costs also in favor of buy with the breakeven being achieved at 9th year (fastest of the thirteen localities).

Perambur:The rent to buy ratio of 0.24 meant that the rental prices are high and it is advisable to buy. But the higher property prices makes it a place to rent.

Porur:The rent to buy ratio of 0.22 meant that the average rental value of residential property is very less compared to its higher prices. Renting is the best option.

Sholinganallur:A rent to buy ratio of 0.27 and moderately high property prices makes it a place to Rent

T. Nagar:A rent to buy ratio 0f 0.28 meant that the rental values are high but the property prices are higher. Therefore it is advised to rent.

Tambaram:The rent to buy ratio of 0.32 meant that the rental prices are moderately high and it is advisable to buy. The years required to save for down payment (4 years, which is least among the thirteen localities) and the property prices being in an affordable range makes it the second most affordable locality (out of the thirteen).


Buying a home is one of the most important decisions in one's life. It is a tough decision to make and emotions cloud the decision making process. Often buying a home is given a high weightage by our family, friends and society at large. People associate the advantages of housing security, physical asset creation and property appreciation with home ownership. Renting is associated with expenditure. However, renting on the other hand gives flexible lifestyle options, high level of mobility and is easy on the purse when compared to the EMI to be paid.

From a personal finance perspective there is always a tussle between buying a home and renting it. Is it prudent to buy? Is there an upside to taking a place on rent? How the lifestyle is going to be affected? What is the impact of the locality chosen? There are numerous other Questions that crop up when this topic is discussed. This research paper tries to find the answers for these questions. As a part of this research we aim to objectively address the major factors which impact the decision of buying or renting.

The common assumption that the residential property always appreciates is inconsistent. The appreciation of a residential property is dependent on several factors. So one can't actually determine the rate at which the residential property is going to appreciate or depreciate. A school of thought supporting the rent argument says the amount invested in a home when invested in equities for the common horizon of 15 years, yields the same or better rewards. The real estate market scenario is similar to that of equity markets because it is unpredictable.

The other common assumption held is buying a home eventually results in increased tax savings. But provided the fact that the EMI payments accounting for principal payment of home loan come under the same section as Provident fund and required risk cover for self and family, one can't enjoy major tax benefits under section 80C. The tax benefits received under section 24B i.e. the interest payments made towards house loan can be matched up with HRA allowance in case of renting. So a professional shouldn't base the decision of buying a house on the tax savings he/she is going to receive.

So eventually the three factors which play a predominant role in making the decision are: Current Property price which determines the EMI to be paid, current monthly Rental value and the current gross income. Monthly rent or the EMI being paid shouldn't end up consuming most of the salary which in turn affects the lifestyle. It is not a good financial decision to buy if the rental value is low compared to the EMI to be paid in case of ownership.

As a part of this research we aim to provide a quantitative answer to the question of buying vs. renting a home. We analyzed the costs associated with owning a house and renting a house across thirteen localities in Chennai: Adyar, Anna Nagar, Ashok Nagar, Chetpet, Chromepet, Kolathur, Medavakkam, Old Mahabalipuram Road, Perambur, Porur, Sholinganallur, T. Nagar and Tambaram.

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Property prices and rental prices of various residential properties were collected from multiple data sources to generate the primary and secondary data for the analysis. The public data sources including the data by National Housing Board (NHB) of India, data from various real estate reports and data from major real estate aggregators is collated. The primary research has been performed by collating information from over 100 real estate agents across the localities considered.

The methodology used for arriving at results considers various key parameters derived from the initial data collected: Price of the residential property and their rental value. Various important factors like the years of saving required for a professional to accumulate the corpus for down payment and the number of square feet per INR 1 lakh are derived from the average property price.

The main idea behind this research was to quantify the buy vs. rent decision from a personal finance perspective. The main factors which drive the decision are: how much more money does a professional need to shell out for buying a home compared to renting it? Can the professional afford this additional amount? ArthaYantra's Buy vs. Rent Score tries to address these questions and come up with a comprehensive scoring system. The scoring system not only tells whether it's better to buy or rent but also tells whether it's affordable to buy or rent.

Property prices and rental prices of various residential properties were collected from multiple data sources to generate the primary and secondary data for the analysis. The public data sources including the data by National Housing Board (NHB) of India, data from various real estate reports and data from major real estate aggregators is collated. The primary research has been performed by collating information from over 100 real estate agents across the localities considered.

The methodology used for arriving at results considers various key parameters derived from the initial data collected: Price of the residential property and their rental value. Various important factors like the years of saving required for a professional to accumulate the corpus for down payment and the number of square feet per INR 1 lakh are derived from the average property price.

The main idea behind this research was to quantify the buy vs. rent decision from a personal finance perspective. The main factors which drive the decision are: how much more money does a professional need to shell out for buying a home compared to renting it? Can the professional afford this additional amount? ArthaYantra's Buy vs. Rent Score tries to address these questions and come up with a comprehensive scoring system. The scoring system not only tells whether it's better to buy or rent but also tells whether it's affordable to buy or rent.

 


4.1 Historical data of Real estate prices


National Housing Board India's Residential Index (NHB Residex) tracks the movement of prices in the different zones of the city. Figure 1 shows the historical NHB Residex values since its inception in 2007.
Chennai as a city has recorded a raise of 209% when compared to the base year of 2007. Zone 4 has recorded the highest raise in index value by 538%. Zones 5 and 8 have followed up with a 530% and 464% raise respectively. All the other zones have also recorded a minimum raise of 80% and a maximum raise of 253% when compared to their base year. Some zones have performed better than the city while other zones have not done as well as the city. Porur falls under Zone1, Perambur under Zone 3 and Kolathur under Zone 4. Anna Nagar and Chetpet fall under Zones 5 and 7 respectively. Ashok Nagar falls under Zone 8, Chromepet under Zone 9 and Adyar under Zone 10.

It is evident that each of the zones has different real estate market and different expectations from real estate. The effort is to identify the places that are most affordable for a professional, given the current scenario. It is important to look at these graphs to get a high level perspective of the general movement of real estate in each of the zones. We delve into each zone's prospect in the later sections. The relative nature of the index hides many interesting facts.


The graph compares the property price and rental value of 1000 sq ft ready to occupy house across thirteen localities of Chennai. The bar graph depicts the average property price in the locality and the line graph depicts the average rental value in the locality.
The most important thing that strikes out while assessing the current residential property prices and NHB Residex is the base effect. Anna Nagar's property prices (INR 11,500,000) as per NHB Residex have grown six fold but still remain similar to property prices of Adyar (INR 13,000,000). Kolathur whose property prices (INR 4,286,500) grew 538% as per NHB Residex are identical with that of Chromepet (INR 4,229,000) which recorded a growth of only 200% in its index value. This means that the property prices of Anna Nagar and Kolathur in the base year 2007 were less compared to other localities.

The most important factor that stands out from the rental value of the properties across the thirteen localities is the anomaly of the property values not being translated to the corresponding rental values. Old Mahabalipuram Road's average property price (INR 3,460,000) is less than that of Tambaram (INR 4,000,000) by 16%. But the Average rental value of Old Mahabalipuram Road (INR 15,500) is higher than that of Tambaram (INR 10,500) by nearly 32%. The same case has been observed with Chromepet and Porur. Though their average residential property values are identical, the average rental value of Chromepet (INR 11,000) is higher than that of Porur (INR 7,500) by 32%.


The above table shows the affordability to rent rank and the affordability to buy rank based on the average property prices and average rental values across the thirteen major localities of Chennai. Chetpet stands out to be the least affordable place in both scenarios. Adyar is the second least affordable place. Ashok Nagar takes the 9th position in both the rankings. Medavakkam takes the 4th place in both the rankings. This means that the high/low property prices of the above 4 localities are translated to their relative rental prices.

Old Mahabalipuram Road stands out as the most affordable place to buy and Porur stands out as the most affordable place to rent. Tambaram takes the second place and Porur takes the third place in the affordability to buy rankings. Kolathur is the second most affordable place to rent and Tambaram is the third most affordable place to rent. The property prices do not match the rental values in the above localities. Chromepet, Sholinganallur, Perambur, Anna Nagar and T. Nagar also face the same scenario. This signifies the fact that people of different localities have different expectations from their real estate markets.

A critical decision in purchasing a home is the down payment required to make in order to avail the facility of housing loan. It is often a substantial amount of money to be paid upfront in order to own the house. While some of the professionals depend on their extended family to provide for this amount, often they do need to save for it. Assuming a 20% of property price as the down payment and saving rate of 25% for a professional with a gross income of 8 lakhs, based on the current average property prices, the time required to save the corpus determines how sooner one can afford to buy a home.

The average property prices translate to the number of year's professional needs to save for the required corpus for down payment. Based on the above stated assumption and average property prices a professional can afford the down payment required to buy a house in Medavakkam, Tambaram, Porur, Kolathur, Chromepet and Old Mahabalipuram Road in 4 years. In order to own a house in Sholinganallur and Perambur a professional has to save for 5 years. To buy a house in Ashok Nagar a professional will need to save for 7 years. In T. Nagar takes 8 years to save for the down payment required to buy a house. A professional can afford the down payment required to buy a house in Anna Nagar and Adyar in 9 years. In order to own a house in Chetpet a professional has to save for 10 years. Figure 3 is in sync with the assigned affordability ranks for ownership.

The area of residential occupancy is an important aspect of life style. It determines the size of the home that is provided for the family. Figure 4 compares the average number of sq ft that can be bought for 1 lakh rupees across thirteen major localities in Chennai.

Chetpet is the costliest locality offering a space of 6.85 sq ft per INR 1 lakh. Old Mahabalipuram Road being the cheapest locality offers a space of 28.90 sq ft per INR 1 lakh. This means that for the same amount of living area, a professional who wants to buy a house in Chetpet has to spend at least 4.5 times the amount he spends in Old Mahabalipuram Road. Tambaram offers a space of 25 sq ft per INR 1 lakh. A professional gets 23.81 sq ft of space for INR 1 lakh in Medavakkam and Porur. This means that a professional investing INR 1 lakh in Medavakkam and Porur gets 4 times the space he would get in Chetpet.

 

Chromepet and Kolathur offer a space of 23.65 sq ft and 23.33 sq ft per INR 1 lakh respectively. A professional gets a space of 21.05 sq ft and 18.27 sq ft per INR 1 lakh in Sholinganallur and Perambur respectively. Ashok Nagar and T. Nagar offer a living space of 11.71 sq ft and 9.85 sq ft per INR 1 lakh respectively. Adyar and Anna Nagar are the second and third costliest locality in Chennai. They offer a living space of 7.69 sq ft and 8.70 sq ft per INR 1 lakh respectively. Figure 4 attuned to the Affordability to Buy Ranking mentioned above.


4.5 Rent to Buy Ratio


The rent to buy ratio explains the additional monthly payments to be paid in case of ownership compared to renting. The ratio also helps in understanding whether the property prices are being translated to the rental value or not. The ratio is calculated based on the average monthly


cost of renting i.e. monthly rental value + monthly maintenance and average monthly cost of ownership i.e. monthly EMI being paid in case of owning the house + monthly Maintenance charges.

 

Anna Nagar has the least rent to buy ratio. This signifies the fact that the higher property prices of the locality are not being translated to the rental value in the locality. Renting is cheaper than owning a house by at least 80%. Adyar and Porur also have low rent to buy ratios. Renting is cheaper than buying by 78% in Adyar and Porur. Old Mahabalipuram Road has high rent to buy ratio.

The urgency to buy rank assigned signifies the fact that higher the rent to buy ratio, the sooner a professional needs to buy a home in the locality. With a rent to buy ratio of 0.52 and the average monthly out of pocket cost of Owning house being moderate, rents being relative higher Old Mahabalipuram Road ranks high in the urgency to buy ratio. Tambaram and Chromepet are also ranked high on urgency to buy rank.

Medavakkam takes the 4th place in the urgency to buy rankings. T. Nagar takes the 5th rank. Kolathur and Sholinganallur rank 6th and 7th respectively in the urgency to buy rank. The 8th position in the urgency to buy rank is taken by Ashok Nagar. The 9th and 10th position in the urgency to buy rank is taken by Perambur and Chetpet respectively.
The rent to buy ratio explains the additional monthly payments to be paid in case of ownership compared to renting. The ratio also helps in understanding whether the property prices are being translated to the rental value or not. The ratio is calculated based on the average monthly cost of renting i.e. monthly rental value + monthly maintenance and average monthly cost of ownership i.e. monthly EMI being paid in case of owning the house + monthly Maintenance charges.


Ignoring the price escalations of the residential property, one important question to be answered is the breakeven horizon i.e. how long a new home buyer would have to own the home to justify the decision of buying instead of renting in financial sense. Figure 5 shows the graphs of the annual out pocket costs incurred in case of ownership and renting based on the average property prices and average rental prices across the thirteen localities. The annual out of pocket cost in case of renting include the annual amount paid towards the rent, the annual maintenance charges paid and the amount of income tax being paid. The annual out of pocket cost in case of ownership include the annual amount paid towards the EMI payments of the house loan, annual maintenance and repair charges and the amount of income tax being paid.

The income tax being paid is considered in calculations because most of the professionals feel buying a home will do a world good for their tax savings. The idea is to compare the tax benefits received in case of buying a home and renting the home. The payments made towards the principal amount of the home loan are considered under section 80C. The payments made towards interest on home loan are considered under section 24b. In case of renting one can claim tax benefits under house rent allowance.

The provident fund received and required risk coverage for self and family also come under section 80C. These items do fill up most of the 80C part. Out of the EMI payments being made, in the initial years most of the amount accounts for interest payments rather than the principal amount. By the time the payment towards principal increases, one can also expect the salary of the professional to increase in turn increasing the Provident fund being received. So, the tax benefit under section 80C in case of ownership doesn't actually add much of advantage.

Though the tax benefits in case of ownership are higher during the initial years, renting the same place gives better tax benefits over the next few years. The benefits of renting are higher especially in the regions where the costs of ownership and renting don't match up during the average loan tenure of 15 years. The breakeven year i.e. the year at which the annual cost of owning house is equal to the annual cost of renting the same place is calculated over the average loan tenure i.e. 15 years. The matchup of cost of ownership and renting in Old Mahabalipuram Road is 9 years. The cost matchup in Tambaram, Medavakkam and Chromepet happens in 15 years. It takes more than 15 years in T. Nagar, Sholinganallur, Porur, Perambur, Kolathur, Chetpet, Ashok Nagar, Anna Nagar and Adyar. The planned length of stay in the house becomes an important aspect in deciding whether to buy or rent.


The property price and rental value of the place speaks volumes about why one should rent or buy the place. They have an impact on the amount of money being spent on the house (be it rent or EMI), the tax savings being received and many other important things. But one can't only rely on the rent to buy ratio and make the decision to buy without assessing his affordability. Similarly a decision to buy a house just because one can afford the EMI is not advisable. ArthaYantra came up with a unique scoring system called ArthaYantra Buy vs. Rent Score (ABRS) which is an effort to seamlessly integrate the above two aspects. We even added another layer of parameter, the rental value. So given a locality, based on the income of the professional ABRS describes a suitable action from wide range of options spanning from why one can't rent to why one has to rent though he/she can afford to buy to why one should buy.

As a part of this research report we have considered the average property prices and rental values of the localities and calculated the ABRS score across different salary ranges. In this research, the scope of the scoring system is confined to rental value and price of the corresponding property of the same region. It can be extended to compare the rental value of one region and property prices of a different region. This makes ABRS a powerful tool to logically gauze the pros and cons of renting and buying a house.
Can't afford both ownership and renting.


 

Adyar : The low rental values compared to high property prices makes it a place where renting can be easily afforded and the EMI associated with home loan in high. It is advisable to rent for a professional with a salary range of 8 – 25 lakhs.

Anna Nagar : The score of 55 signifies that though the rents are high, it is advisable to rent because the property prices are also high. The EMI payments to be made in case of ownership are not affordable.

Ashok Nagar : The score of 55 for a professional with a salary range of 8-15 lakhs signifies that the monthly cost of renting is cheaper than buying by more than 70%. The low rental prices also meant that though the professional with a salary more than 16 lakhs can afford to buy a house renting is a better option.

Chetpet : A professional with a salary of 8 lakhs cannot afford this locality. He will not be able to pay the rents nor will he be able to afford the EMI payments. A professional with a salary range of 9-25 lakhs can afford the rents in this locality but can't afford the EMI associated with home loans.

Chromepet : The score of 65 for a professional with a salary range of 8-11 lakhs signifies that though the rents are high, it is advisable to rent because the property prices are also high. The EMI payments to be made in case of ownership are not affordable. A professional with a salary range of 12-25 lakhs is advised to buy.

Kolathur : A professional with a salary range 8-11 lakhs is advised to rent. He should rent even with the high rents because he can't afford the EMI associated with a home loan. A professional with a salary more than 12 lakhs can afford to buy a house, but because of the low rents, renting is a better option.

Medavakkam:The score of 65 for a professional with a salary range of 8-11 lakhs signifies that though the rents are high, it is advisable to rent because the property prices are also high. The EMI payments to be made in case of ownership are not affordable. A professional with a salary range of 12-25 lakhs is advised to buy.


Old Mahabalipuram Road:A professional with a salary of 8 lakhs is better of renting. A professional with a salary range of 9-11 lakhs falls in the neutral zone i.e. he can afford to buy and it is advisable to buy but have to make few adjustments to the current lifestyle in order to afford the additional amount for EMI payments. The professionals with a salary range of 12-25 lakhs are advised to buy.

Perambur:A professional with a salary range of 8-12 lakhs has an ABRS score of 55. The score of 55 signifies that though the rents are high, it is advisable to rent because the property prices are also high. The EMI payments to be made in case of ownership are not affordable. A person with a salary range of 13-15 lakhs is in a neutral zone but is still advised to rent because rents are cheaper. A person with a salary range of 16-25 lakhs should buy as the rents are high.

Porur:A professional with a salary range 8-11 lakhs is advised to rent. He should rent even with the high rents because he can't afford the EMI associated with a home loan. A professional with a salary more than 12 lakhs can afford to buy a house, but because of the low rents, renting is a better option.

Sholinganallur:A professional with a salary range of 8-10 lakhs has an ABRS score of 55. The score of 55 signifies that though the rents are high, it is advisable to rent because the property prices are also high. The EMI payments to be made in case of ownership are not affordable. A person with a salary range of 11-15 lakhs is in a neutral zone but is still advised to rent because rents are cheaper. A person with a salary range of 16-25 lakhs should buy as the rents are high.

T. Nagar:The score of 55 signifies that though the rents are high, it is advisable to rent because the property prices are also high. The EMI payments to be made in case of ownership are not affordable.

Tambaram:A professional with a salary range of 8 lakhs is better of renting. A professional with a salary of 9-14 lakhs falls in the neutral zone i.e. he can afford to buy and it is advisable to buy but have to make few adjustments to the current lifestyle in order to afford the additional amount for EMI payments. The professionals with a salary range of more than 15 lakhs are advised to buy.


*Initial corpus required for owning = 20% of the Average property price (down payment for house loan) **Initial corpus required for renting= Amount equivalent to 10 months of rental value (Hyderabad which is 3 months) *** Average out of pocket cost(Renting the house) / Average out of pocket cost (Owning the house)
The gross income of 8 lakhs per annum is considered.
Here are some important numbers to look at before making the decision:

Based on the current real estate markets, Tambaram and Medavakkam are the best places to own a house. The property prices and rental values in these three localities are low, thus making them the most affordable places for a professional to rent or own a house. The larger residential spaces offered by Old Mahabalipuram Road and Tambaram provide a better lifestyle option. The real estate market of Old Mahabalipuram Road favors the home owners because of its moderate property prices and high rental value. Though the moderate property prices of Porur and Kolathur make a strong case of ownership for professionals with higher salaries, the low rental values make renting a better option. Chetpet is the least affordable locality for a professional because of its high property prices and rental values.

The research addresses the fact that Buy vs. rent decision has a huge impact on the personal finance of a professional. Buying a home is an integral part of every one's dream. But a very calculated and merit based judgment is needed before taking the decision to own the house. The comprehensive ArthaYantra Buy vs. Rent Score (ABRS) suggests the decision a professional should take across the twelve major localities of Chennai based on the current rental values, property prices and the salary. If a professional finds himself in the rent zone as per the ABRS but still wants to buy a house, one has to make sure that their Emotional Premium attached with buying a house is going to match the EMI premium being paid.
The data is related to following localities of Chennai:

Adyar, Anna Nagar, Ashok Nagar, Chetpet, Chromepet, Kolathur, Medavakkam, Old Mahabalipuram Road, Perambur, Porur, Sholinganallur, T. Nagar and Tambaram.

The property tax to be paid is considered as 1.5% of the property value. The property tax calculation reforms need some stringent reforms to regulate the process. In most places the value is calculated based on the rental value. The rental values being shown in the related local governing bodies website varies from the actual rental prices.

The tax benefits received under section 80C is considered as INR 1.2 lakh both in the case of house ownership and renting.

FIGURES:

Figure 1: Graphical Representation of Buy Vs. Rent in Chennai

Figure 2: Historical values of National Housing Board India Residential Index (NHB Residex)

Figure 3: Average property price and rental values across thirteen major localities of Chennai

Figure 4: No. of years required to save the corpus for down payment across thirteen major localities of Chennai

Figure 5: Average no. of sq ft per INR 1lakh across thirteen major localities of Chennai

Figure 6: Break even horizon for the thirteen major localities of Chennai


TABLE:

Table 1 : Factors associated with home ownership and renting

Table 2 : Locality wise ranking based on the affordability to rent and buy

Table 3 : Rent to Buy ratio and Urgency to buy rank of thirteen major localities across Chennai

Table 4 : ArthaYantra Buy vs. Rent Score Explanation
Table 5 : ArthaYantra Buy vs. Rent scores for different salary ranges across thirteen
major Localities of Chennai.

Table 6 : Other important numbers


SOURCES:

National Housing Board, India: www.nhb.org.in

Jones Lang LaSalle: www.joneslanglasalle.co.in

Makaan: www.makaan.com

Magic Bricks: www.magicbricks.com

Multiple Primary sources (100+)

ArthaYantra is a young and innovative company started by a group of alumni of the Indian School of Business (ISB) Hyderabad. It provides integrated personal finance services using its unique proprietary framework, Personal Financial Lifecycle Management (PFLM)TM, which helps clients achieve their financial goals. ArthaYantra's vision is to provide independent, high quality, customized financial planning solutions and their efficient execution to individuals. It employs proprietary financial models and enable investments through well balanced passive investment strategies. ArthaYantra's clientele includes individuals from India, US, Europe and Middle East.

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