Buy vs rent 2015 | Buy Vs Rent Report - 8 Cities-2015

ArthaYantra
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A Research initiative by ArthaYantra

Table of Contents
C
Summary
1. Introduction 5
2. Methodology 6
3. Assumptions 7
4. Findings
4.1 Historical Data of NHB residex 8
4.2 Property Cost vs Rental Value 9
4.3 Affordability to buy and Affordability to rent ranking 11
4.4 Area Covered 12
4.5 Down Payment 13
4.6 Urgency To buy ratio 14
4.7 Cash Flow Break Even analysis 15
5 ArthaYantra Buy vs. Rent Score (ABRS) 17
6. Comparison with previous years 19
7. Conclusion 27
8. Limitations 28
9. Appendix 29
10.Sources 29
Copyright 2014 www.arthayantra.com

BUY Vs. RENT: A PERSONAL FINANCE PERSPECTIVE
Summary
The current edition of Buy vs Rent research covers 8 major cities across India.
Ahmedabad: Ahmedabad is now the cheapest city to rent a property unlike the previous
year.It also stands 2nd in affordability to buy ratio. Buying a home would be a better option
for individuals with income above 12 lacs.
Bengaluru: Over the years the city of Bangalore is favored for renting than buying which is
clearly indicated by higher increase in rents as compared to the property prices. The
average property rents increased by 37.51% whereas property prices increased by 12.64%.
It stands 4th in term of affordability to rent amongst the 8 cities. It is suitable for professionals
having income more than 15 lacs to buy the property in the city.
Chennai: Chennai experienced a decline in property prices in the last 3 years whereas the
rentals have increased by 10%. Due to the price shift, the affordability to rent has gone to 6th
from the last year's rank of 4th .More or less the property prices remained stagnant with a
marginal decline by 3%. Suitable for professionals with income 20 lacs or above.
Delhi NCR: City with a population consisting of mostly migrants have become expensive to
rent as people prefer to rent as compared to buy. The rentals have increased by 29.05%
which is the second highest after Bangalore. Due to higher rentals the affordability to rent
rank has gone down to 7th from 6th. The affordability to buy rank remains 7th as the city has
the second highest property rates in the county. It is recommended to rent the property for
all the professionals.
Hyderabad: Hyderabad maintains the reputation of being the most affordable place to
buy a property. The 10% decline in property prices assist in keeping the affordability to buy
at the top most rank. However the rentals increased marginally upwards in the past 3 year's
period. Recommended to buy for all the professionals having income above 8 lacs.
Kolkata: During the past three years the property prices in Kolkata slipped by 2.7% . The
rents also went down by 8.5% making the city more affordable to rent and as well as buy as
compared to previous year. The city is now 3rd in affordability to buy rank. It has now
become affordable for professionals with income of 12 lacs or more to buy a home .
Mumbai: Mumbai remains the most expensive city to either buy or rent a home for the third
consecutive year. Over the period of 3 years the property prices have increased by as
much as 49.9% which is the highest amongst all the cities. The property trend does indicate
increase in demand to buy but it is highly recommended to rent for all the professionals.
Pune: Pune have seen second high increase in property prices after Mumbai at 38.9% rise in
past 3 years. The rents have also increased by 21.2%. Such high increase in prices has
changed the affordability to buy rank to 5th from the last years 3rd. Also the affordability to
rent rank slipped to 4th. Professionals with salary below 15 lacs are recommended to rent
the property.
Copyright C 2014 www.arthayantra.com Page No:3

Infographic data having national snapshot for all the cities
Buy
Neutral
Rent
Buy vs. Rent : A National Snapshot
Bengaluru
Chennai
Delhi
Hyderabad
Mumbai
Pune
Kolkata
Ahmedabad
Years to accumulate
Down payment (20%)
MUMBAI
Sq.ft/Lakh ( )
Rent
8-12 lacs
Neutral
13-16 lacs
Buy
17-25 lacs
Rent
8-18 lacs
Neutral
19-25 lacs
Rent
8-25 lacs
Neutral
8 lacs
Buy
9 lacs -25 lacs
Rent
8-25 lacs
Rent
8-15 lacs
Neutral
16-25 lacs
Rent
8-10 lacs
Neutral
11-13 lacs
Buy
14-25 lacs
Rent
8-10 lacs
Neutral
11-25 lacs
DELHI NCR CHENNAI KOLKATA BENGALURU PUNE AHMEDABAD HYDERABAD
6.10 8.97 14.32 20.06 16.32 16.83 24.31 29.54
13.3 9.7 6.5
4.8 5.8 5.6 4.1 3.4
Figure 1: National snapshot

1. Introduction
Over the years buying has become an 'Indian Dream'. A lot of sentiments are attached
when it comes to owning a home for the family. However, with the increasing real estate
prices and cost of raw materials makes them think twice before taking such decisions. Also
with the buying decision there are multiple factors like income tax savings, property tax etc.
which needs to be considered. The purchase of a property is also looked as a means of
capital appreciation and for a lot of Indians it's a safe haven for investments. But the reality
might be different from what they think especially in post 2008 era.
Other alternative to buying is the renting of the property, which does not expensive as
buying initially. To a lot of professionals, renting could be a more feasible option as it
provides flexibility to rent a property as per their lifestyle as some people do not intend to live
in a city for a longer period of time or in case of someone whose profession does not allow
them to settle down in one city for a long time. For too long buying or renting a home has
been a qualitative question. ABRS report makes it into clear quantitative framework on buy
vs rent decision.
1) Cash Flows
The first and foremost decision would depend on the impact on the cash flows each option
would have. To buy a property one has to go through the down payment for the loan, EMI
to be paid, property taxes and the regular maintenance and repair costs. Renting would
attract the monthly payment towards rent along with the maintenance cost. The
incremental rents in the subsequent years should not be ignored as the rents are most likely
to increase year on year. The savings after such fixed payments would derive whether
owning or renting would a feasible option.
2) Tax Savings
The net savings after bearing the cost of ownership and renting would have major impact
on the tax savings for each of the decision. For some cases it becomes a deciding factor as
the tax savings through Section 24 B and Section 80 C of income tax would reduce the net
payments towards the EMI's. On other hand, renting would also save your taxable income
as the major or whole portion of the rent paid can be saved by claiming it under Section 10
as HRA. In short both options would help the tax savings; the comparative savings for the
longer run would give a real picture on what should be done.
Taking a decision on real estate can become more complicated than it looks, in order to
simplify that Arthayantra is presenting the third Version of Buy vs. Rent report for 8 major
cities in India which deeply analyzes the changes in trends of the property prices and their
rental values over the past three years. It also studies how convenient it would be for
working professionals to buy or rent a property considering various aspects and help them
take a sound financial decision.

2. Methodology
Property price 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 the 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 is 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. This year also saw a 50% increase in the localities covered city. This has been
done to increase the coverage area and reduce error rate.

3. Assumptions
 The sale price and rental values are calculated for 1000 sq ft area ready to occupy
residential property.
 20% of the cost of the house is considered as the required down payment to buy a
house.
 The loan tenure is 15 years.
 The lending rate for the loan is 10.50%.
 Average savings rate is 25%.
 The minimum gross income required to buy a house is calculated by considering
50%of monthly take home salary= Monthly EMI to be paid.
 The gross income of the professional increases 10% annually.
 1.5% of the property value is considered as the property tax to be paid.
 10% annual increase in rent is considered.
 Property appreciation is not considered.

4. Findings
4.1 Historical data for NHB Residex
In the Indian real estate growth story, Chennai typically is not spoken about. However, the
NHB index which indicates real estate price growth across Indian cities shows Chennai
index at 349 which has been seen the highest growth since its inception in 2007.
Figure 2: Historical values of National Housing Board India Resident Index ( NHBResidex)
Pune is at distant second place having experienced an increase of 132 basis points. On the
other hand, financial capital Mumbai's real estate prices increased by 129 basis points.
Cities like Delhi, Ahmedabad and Kolkata's index value have doubled (99, 109 and 106
basis points respectively) during the 7 year period starting from 2007. For the home buyers,
Hyderabad proves to be the cheapest as it has shown negative growth ( - 5 basis points)
followed by Bangalore whose Real estate index increased by just 7%.
With the given analysis of real estate price trends the report aims to provide brief study of
the real estate price change during last 3 years (2012 – 2014) and facilitate the decision
making for the buyers of home.

4.2 Property cost Vs. Rental Value
The key parameter in determining whether to buy or rent a home is the property cost vis-à-vis
the rental value. In this study Arthayantra compares property prices and rental values of
1000 sq feet ready to occupy house across eight major cities. The diagram below shows the
findings -
Average Property Price vs Rent
18000
35
30
25
20
15
10
5
0 0
16000
14000
12000
10000
8000
6000
4000
2000
Bangalore
Chennai
Delhi
Hyderabad
Mumbai
Pune
Kolkata
Ahmedabad
Average Property Prices Average Rental Value
Figure 3: Average Property price and rental values across 8 major cities
The average property prices in the city of Delhi ( Rs. 1.1 Crore) are almost equal to the
average property prices of Kolkata and Pune combined( Rs. 59.4 and Rs. 49.9 lacs).
Mumbai remains the city with the highest residential real estate prices followed by Delhi.
These two cities are the least affordable for a middle class home seeker. Chennai which
showed highest increment in real estate prices as per NHB residex has the 3rd highest
property prices ( Rs. 69.5 lacs) in these 8 cities.
As far as the average rents are concerned, Mumbai has the average rent of Rs. 32250
which corresponds with the property rates as the highest when compared to other 7 cities.
Ahmedabad comes out as city with most affordable rentals with Rs. 10250 marginally lesser
than Hyderabad (Rs. 10640). Interesting fact is that some cities having comparatively lower
property rates have higher rents. Kolkata whose average property prices were lower as
compared to Pune has higher rent as compared to the latter (Rs.16308 vsRs.14545). The
rentals are even closer to cities like Chennai (Rs. 16567) and Bangalore (Rs.16758). These
factors make buying a home more attractive in Kolkata than renting. Hyderabad remains
the most suitable city to either buy or rent a property with the second lowest average rent
and lowest property prices.

Change in Property Rates (2012‐2014)
Trends in the last 3 years period starting 2012 have shown a different picture as depicted by
the 7 year growth index in NHB. Out of the 7 cities(Ahmedabad was not a part of our
research for 2012)Mumbaihas experienced highest gain in the real estate prices in the years
2012-2014 with 49.87% increase, followed by Pune (38.91%) and Bangalore (12.64%).
Chennai which had the highest rise is sixth amongst the seven cities with a negative growth
of -2.97% during last 3 years. Hyderabad also showed negative trend in past 3 years
emerging as the city with the cheapest real estate prices. The decline in value was also
seen in Kolkata. The 3 year trend clearly shows that each market is behaving differently.
From ainflation adjusted growth perspective, most cities in India has lost value. The only
ones that are in the positive territory are Mumbai and Pune. Despite Mumbai being
expensive, people living there prefer buying more than renting
Change in Property Prices 2012-14
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00%
12.64%
-20.00%
Bangalore
2.59%
49.87%
38.91%
-2.97% -2.69%
Chennai
-10.08%
Delhi
Hyderabad
Mumbai
Pune
Kolkata
Change
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00%
Change in Rental Value 2012-14
37.51%
-20.00%
Bangalore
10.75%
Chennai
29.05%
1.93%
Delhi
Hyderabad
13.07%
Mumbai
21.21%
-8.55%
Pune
Kolkata
Change
Cities like Bangalore, Chennai and Delhi had incremented rentals more than
proportionately compared to the property price rise. Bangalore has seen the largest
increase in rentals at 37.5% over the last three years. This growth dwarfs the asset growth in
the city. Delhi has the second highest growth; even here hare have shown increase in
rental yields when compared to the asset appreciation. This indicates that the
professional's behavior is more inclined to buying than renting.
The change in rentals in other cities was unlike the pattern which was shown in the property
price changes. Hyderabad indicated a marginal increase in rental of 1.93% as compared
to the decline which was shown in the property prices except Kolkata which
complimented the property price change pattern in past 3 years with a decrease of 8.5%.

4.3 Affordability to buy and Affordability to Rent ranking
Assuming the income factors for a middle class family and their savings ratio and factoring
in with the rental and buying prices of properties in the 8 cities, Hyderabad comes to be the
most affordable city to buy a property for the third straight year. The decline in the buy
prices and a marginal increase in rental prices helped the city to remain on top in terms of
affordability.
Affordability to buy trend 2012‐2014 Affordability to rent trend 2012‐14
CITIES 2012 2013 2014
HYDERABAD 1 1 1
Bangalore 4 4 4
Delhi 6 7 7
Chennai 5 6 6
Kolkata 3 5 3
Pune 2 3 5
Mumbai 7 8 8
Ahmedabad NA 2 2
CITIES 2012 2013 2014
HYDERABAD 1 1 2
Bangalore 3 3 3
Delhi 6 6 7
Chennai 4 4 6
Kolkata 5 7 5
Pune 2 2 4
Mumbai 7 8 8
Ahmedabad NA 5 1
Table 1 ( Affordability to buy rank) Table 2 ( Affordability to rent rank)
After the introduction of Ahmedabad in the year 2013, the city has now replaced
Hyderabad as the most affordable place to rent as per the new ranking. Mumbai easily
managed to maintain its familiar position as the most expensive to either buy or rent for the
second straight year whereas Chennai became more expensive to rent at 6th rank pushing
Delhi further below to 7th rank. Kolkata after going through a negative growth phase in
property prices have become more economical for both buy and rent as compared to the
last year.
When it comes to affordability to buy, most of the cities managed to maintain same
position as on last year except Kolkata and Pune who replaced each other at 3 and 5
respectively.

4.4 Area Covered
For every middle class Indian spender, quantity and economy is one of the biggest factors
behind every purchase decision. Just like the mileage of a vehicle i.e Kilometers covered
per liter of fuel is very essential, area covered per lac rupees spend for a home is also very
important aspect to consider. This would facilitate the investor to make a decision
especially when they want a place for a joint family and sometimes even a nuclear family.
With the change in property prices during the past three years the area covered per lac
rupee spent also changes accordingly. This change in comparison with the previous 2 years
is depicted in the below figure.
No. of sq ft/ Lakh
24.32
20.18
20.06
15.69
16.84
6.10
7.50
9.15
8.96
8.58
9.19
14.39
13.15
13.96
18.55
16.33
16.01
18.39
19.52
23.39
23.95
26.57
29.55
0 5 10 15 20 25 30
No.of Years
Figure 4: Number of square feet covered per one lakh of amount paid
Ahmedabad
Kolkata
Pune
Mumbai
Hyderabad
Delhi
Chennai
Bangalore
2014
2013
2012
Mumbai being the costliest city amongst all has the least coverage per lac which is just 20%
of Hyderabad which proves to be the most economical city. It remains the most
economical for the third consecutive years. Kolkata improvised significantly by providing
28% more area as compared to previous year. Ahmedabad becomes second most
economical covering 20.5% more area as compared to 2013. Pune becomes expensive
year on year as the area covered reduced by 9% from the previous year. Professional from
Delhi would get half of the area in Bangalore which stands5th when it comes to the area
covered. From lifestyle perspective consumer from Hyderabad Ahmedabad, Kolkata
Bangalore tends to have large house to buy as well as rent.

4.5 Down payment
Taking a loan is the only option left for working professionals to fulfill their dream to buy a
home. The banks have also tightened the rules by approving loan equivalent to 80% of the
value of property. This forces the homebuyers to arrange for the down payment for the
loan.Assuming the savings rate of 25% of income( post income tax and property tax of Rs
1.5%) and the income increment of 10% year on year, the time required to accumulate the
corpus for the down payment is presented in the below figure –
Years
to
save
money
for
downpayment
Ahmedabad
Kolkata
Pune
Hyderabad
Delhi
Chennai
Bangalore
4.1
4.8
4.8
5.0
5.2
5.6
4.3
6.0
13.3
11.3
9.6 2014
9.7
10.1
9.5
6.5
7.0
6.7
5.8
5.9
5.3
3.4
4.1
3.8
0 2 4 6 8 10 12 14
No.of Years
Figure 5: Number of years required to save the corpus for down payment
Mumbai
2013
2012
Professionals living in Hyderabadwould take least amount of time (3.4 years) to
accumulate the down payments for the home loan followed by Ahmedabad (4.1 Years).
Overall the required number of years has been reduced in all cities comparedto the
previous year's findings except Pune and Mumbai. Delhi has shown some improvement
from the last year as the number of years has fallen by .4years from the previous value of
10.1 years. Similar improvement can be seen in Kolkata with a change of1.2 years. Time
taken to accumulate the down payment amount in Mumbai is more than thrice of
Hyderabad. The Mumbaikars would have to wait for a very long time to by their dream
home. Despite this uphill task, most people are becoming house owners. This is largely
driven by the ability of the professional to finance their home from friends and family
instead of just relying on savings, loans etc. This has also pushed the personal finance
situation of many families to the brink.

4.6 Urgency to Buy Ratio
Urgency to buy ratio is a ranking that enables professionals to take an objective decision to
either buy or rent. The urgency to buy ratio indicates what extra payment one has to pay
every month if the property is purchased instead of rented. This ration helps in
understanding whether the rental yields are in line with the property prices in a city. The
average monthly cost of renting is derived from the sum of rents and maintenance cost
whereas monthly cost of buying is calculated by adding maintenance cost with the
monthly EMI's. It is a good means to understand if property prices are inflated.
Average out of
Pocket Cost
(Buying home)
(`)
Rent to
Buy Ra*o
Urgency to
Buy Ra*o
(2014)
AHMEDABAD 11,249 37,369 0.28 4 1
BENGALURU 17,758 55,163 0.31 3 5 5
CHENNAI 17,567 62,452 0.27 6 7 6
DELHI NCR 24,406 99,729 0.24 7 8 7
HYDERABAD 11,638 30,930 0.36 2 3 3
KOLKATA 17,308 45,084 0.37 1 2 1
MUMBAI 33,250 145,883 0.22 8 6 4
PUNE 15,545 53,528 0.28 5 4 2
*Maintenance cost of Rs 1000 per month added to all.
Table 3 : Urgency to buy rank
CITIES Average out of
Pocket Cost
(Ren*ng home)
(`)
Urgency to
Buy Ra*o
(2013)
Urgency to
Buy Ra*o
(2012)
Mumbai has the least Rent to Buy ratio .22 which means that renting home is 78% cheaper
than buying. Delhi which had a lowest ratio in the previous year has bettered its position to
7. Kolkata has the highest ratio of .37 which would enable the home buyer to take the
decision to buy if they can afford the EMI cost per month.

4.7 Cash Flow Break Even Analysis
Cash flow break even analysis explores the cash outflow for buy vs rent. The intersection of
cash outflows due to rent or buy in the future is the break-even point.
The study will also give another dimension to the buying or renting decision. The city where
the breakeven year comes before the loan tenure expires is supposed to be more suited for
buying whereas the city where the breakeven year is not attained before 15 years, renting
would be more suitable. In comparison with the last year, a lot of changes have occurred in
the tax treatment of ownership of the property which is also been taken into account.
For example the interest component of the EMI is subject to deduction u/s 24B and the
principal part u/s 80C of Income tax act. In case of renting, benefit is available under house
rent allowance. Using these parameters one can identify the time period where the cost of
renting would be equal to the cost of buying within the loan tenure. The recent change
introduced due to finance bill will also have some impact on the decision.
Factors considered for buying Factors considered for renting
 Maintenance cost
 Tax benefit u/s 24 B ( Savings on interest paid)
 Tax benefit u/s 80 C ( Savings on principal repaid
 Rent
 Maintenance Cost
 Tax Benefit u/s 10 ( HRA )
Table 4: Factors associated with home ownership and renting
 Down payment
 EMI

15+
15+
15
15+
15+
15+
15+
15+
14
14
14
14
12
11
11
13
15+
15+
15+
15+
15
15
15+
0 5 10 15 20
No.of Years
Figure 6: Break Even Horizon for eight major cities of India
Bangalore
Chennai
Delhi
Hyderabad
Mumbai
Pune
Kolkata
Ahmedabad
2014
2013
2012
Hyderabad having the low rentals is the most suitable city for buying with the breakeven
year of 13 years. This was mainly due to drop in property prices during the past three years.
Kolkata comes second where the break -even year is 14.This is mainly due to drop in the
property prices. Ahmedabad would be more suitable for renting as of now due to very low
rents. For the rest of the cities the time taken to equalize the cost of renting to buying is over
15 years which makes them more suitable for renting. This indicated more inclination
towards renting.

5. ArthaYantra Buy VS. Rent Score (ABRS)
The property price and rental value of the place determines if 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.
Score Recommended Acon
100 Buy
90 Buy
87.5 Neutral / Recommended to Buy
80 Neutral / Can afford both Buying and Renting. Renting is recommended
77.5 Neutral / Recommended to Buy
75 Rent
67.5 Neutral / Recommended to Rent
55 Can not afford to Buy or Rent
Table 5: ArthaYantra Buy vs. Rent Score Explanation

Income Ahmedabad Bengaluru Chennai Delhi NCR Hyderabad Kolkata Mumbai Pune
8 Lakhs 55 65 55 55 77.5 65 55 55
10 Lakhs 67.5 65 55 55 90 65 55 55
12 Lakhs 80 65 55 55 90 77.5 55 55
15 Lakhs 80 77.5 67.5 55 90 90 55 67.5
20 Lakhs 80 90 80 55 90 90 55 80
25 Lakhs 80 90 80 67.5 90 90 55 80
Table 5: ArthaYantra Buy vs. Rent scores for different income levels across eight major cities of India.

6. Comparison with previous years
Bengaluru - Rising Rental Yields
Over the last 3 years, Bengaluru has seen relatively higher growth in the rental rates
compared to the property prices. Rental values in the area increased by 37.51% compared
to 12.64% increase in the property prices. The NHB Residex value for the Jan – March 2014
quarter is recorded at 107, which is 2 base points less than the index value recorded during
the same quarter of last year. Among the 8 cities, Bengaluru is ranked as third most
affordable place to rent and fourth affordable place to buy a property. The years of saving
required for the down payment in Bengaluru has moved down marginally to 5.8 from 5.9
when compared to last year. A new home buyer in Bengaluru, now gets 2.00% more carpet
area compared to the previous year, but, gets lesser carpet area by 11.20% when
compared to 2012.The city being the most preferred one for the immigrants as it provides
favorable working opportunities to them, renting is been more prominent option rather
than buying the property. This is well indicated by the superior increase in rentals as
compared to the property prices in past few years.The ABRS values of Bangalore recorded
during this year increased to 90 making the professionals who fall under salary range of 20
lacs, affordable to buy a property when compared to the values recorded during the
previous year.For professionals under 20 lacs income, Bangalore is the city where renting is
more optimal financially. There are micro markets such as Mysore Road and Old Madras
Road where it affordable to buy even at salary below 20 lacs. However, professionals have
to make lifestyle compromises and adjust to the higher commitment. The breakeven year
where the cost of owning equals the cost of renting is more than 15 years for professionals
having annual income of less than the recommended salary range for buying. The last
year's figure was 15 years.
Bengaluru
Years to save down
payment
2012: 2014:
Rent
5 6
Affordability to Rent:
Rank 3
Purchase Price in
Lakhs
2012: 2014:
54.37 61.24
Urgency to Buy:
Rank 3
Sq.Ft / Lakh
2012: 2014:
Buy
18.39 16.33
Affordability to Buy:
Rank 4

Chennai - Plateau Market
The NHB Residex value for the Jan – March 2014 quarter is recorded at 349, which is 39 base
points higher than the index value recorded during the same quarter of last year. Rental
value of the areas over the three periods has increased by 10.75% whereas the property
prices have decreased by 2.97%. Among the 8 areas, Chennai is ranked as 6th affordable
place to rent and as well as buy. With respect to affordability of renting, Chennai's ranking
has increased to 6 when compared to previous years ranking of 4, which means it has
become more costly when compared to the earlier years. On the other hand, affordability
to buy remains on the same place but the years of saving has come down to 6.5 from 7
compared to last year due to decline in the real estate prices and increment in the savings
due to change in tax benefit structure. A new home buyer in Chennai, now gets 9.43% more
carpet area when compared to last year and 3.08% more area when compared to 2012.
The ABRS values of Chennai recorded during this year increased to 80 making the
professionals who fall under salary range of 20 – 25 lakhs, either to buy a property/rent it out
compared to the values recorded during the previous year. However, in case if one having
income below that recommended level choose to buy a home in Chennai can choose
areas like Sholinganallur and Kolathur where the property prices were much lower than the
average price in the city and hence would be more affordable to buy.The breakeven
year is more than 15 matching the last years number.
Chennai
Years to save down
payment
2012:
Rent
7 6
Rank 6
Purchase Price in
Lakhs
2012: 2014:
71.62 69.49
Urgency to Buy:
Rank 6
Sq.Ft / Lakh
2012: 2014:
Buy
13.96 14.39
Rank 6

Delhi - Rents are increasing
Delhi continues to be second most expensive city to own a home in India. The NHB Residex
value for the Jan – March 2014 quarter is recorded at 199, which is 3 base points lesser than
the index value recorded during the same quarter of last year. The average rental value of
Delhi over the last three years has increased by 29.05% whereas the average property
prices increased by just 2.59% over the same period. Due to the increase in the rental
values, Delhi stands at 7th place in the most affordable place to rent category. For an
Individual with annual income of 8 Lakhs to buy a “Dream House” will require 9.70 years to
accumulate fund for the down payment. A new home buyer in Delhi, now get 4.43% more
carpet area compared to the previous year, but, will end up getting less area by 2.50%
when compared with 2012. The ABRS score for professionals with a salary range of 8 – 25
lakhs remains in between 55 – 67.50 making it a place to rent for majority of such individuals.
The residents are preferring areas in the NCR region which have comparatively lower
prices. The areas like Greater Noida Expressway and Indirapuram (Gaziabad) have the
lowest prices in the region but living in these areas would increase the travel time to the
workplace and hence could cause inconvenience. The breakeven year figure also
suggest the same for the earning professionals.
Delhi
Years to save down
payment
2012: 2014:
Rent
9 10
Rank 7
Purchase Price in
Lakhs
2012: 2014:
108.82 111.64
Urgency to Buy:
Rank 7
Sq.Ft / Lakh
2012: 2014:
Buy
9.19 8.96
Rank 7

Hyderabad – The Affordable Market
Hyderabad continues to be the most affordable real estate market among the major cities
of India. The NHB Residex value for the Jan – March 2014 quarter is recorded at 95, which is 7
base points higher than the index value recorded during the same quarter of last year.
Rental values in the area increased by 1.93% over last 3 years but reduced by 11.35% when
compared last year. On the other hand, property prices are continuing to decline by 5% on
an average in the past 3 years, making Hyderabad the most affordable to place to buy a
property among the 8 cities picked up for this study, but, moves down to 2nd place in the
most affordable place to rent a home category. The saving required to afford buying a
property in Hyderabad has declined to 3.40 years from 3.80 years in 2012. Based on the
previous year prices, a middle professional needed to save for 4.10 years. A new home
buyer in Hyderabad, now gets 23.38% more carpet area compared to the previous year
and 11.22% when compared to 2012.The ABRS score for professionals with annual income
of 10 Lakhs has increased to 90 from 77.50 as recorded in the previous year, making
Hyderabad the most affordable place to buy among the eight places studied. The most
affordable regions in the city are Uppal and Rajendra Nagar. The home buyers would
recover the cost in less than 15 years which shows a green flag to buy the property.
Hyderabad
Years to save down
payment
2012: 2014:
Rent
4 3
Rank 2
Purchase Price in
Lakhs
2012: 2014:
37.64 33.84
Urgency to Buy:
Rank 1
Sq.Ft / Lakh
2012: 2014:
Buy
26.57 29.55
Rank 1

Kolkata – Contraction in rentals
Real estate in Kolkata scored negative both in terms of property prices and rental
prices.The fall is the steepest amongst all the cities . The average rental value and property
value of the place has decreased by 8.55% and 2.69% respectively over the last 3 years.
However, the NHB Residex value for the Jan – March 2014 quarter is recorded at 206, which
is 9 base points higher than the index value recorded during the same quarter of last year.
Among the 8 cities, Kolkata is ranked as 5th affordable place to rent and 3rd affordable
place to buy a property. The years of saving required to afford buying a property in Kolkata
has decline to 4.80 from last year's stats of 6.00. Based on 2014 analysis, a new home buyer in
Kolkata now gets 28.59% more carpet area compared to the previous year, but, when
compared to 2012, the carpet area has just increased by 2.77%. The ABRS score of 77.50
suggests that, for an individual whose annual salary is 12 Lakhs is considered to be in a
Neutral Zone, mostly advised to rent. The professional whose salary range is between 13 – 25
lakhs is better off owning a home than renting it. These values remain in sync with the values
recorded in the previous year. However the break even figure went to 14 years as
compared to 11 years in 2013, but it would not make much impact on the
recommendation to buy the property. The outer regions of city like Howrah and Jadhavpur
offer lower real estate prices which could be affordable for the individual's having lower
income.
Kolkata
Years to save down
payment
2012: 2014:
Rent
5 5
Rank 5
Purchase Price in
Lakhs
2012: 2014:
51.23 49.85
Urgency to Buy:
Rank 1
Sq.Ft / Lakh
2012: 2014:
Buy
19.52 20.06
Rank 3

Mumbai – Zooming real estate price
Mumbai still remains the costliest real estate market in India for 3 consecutive years. The NHB
Residex value for the Jan – March 2014 quarter is recorded at 229, which is 7 base points
higher than the index value recorded during the same quarter of last year. While the rental
prices have increased by 13.07% in the last 3 years, whereas, the property prices have
increased by a whopping 49.87%. Among the 8 cities, Mumbai stands as least affordable
place in case of both renting and owning a house. The Mumbai resident still prefer to buy
even if they have to travel far for work which indicates the annual increment in property
prices to be far higher than the increase in annual rents. The years of saving required to
afford buying a property in Mumbai has increased to 13.30 from 9.60 when compared to
2012 stats. Based on the previous year prices, a middle professional needed to save for
11.30 years. A new home buyer in Mumbai now gets 18.67% lesser carpet area compared
to the previous year and 33.33% less area when compared to 2012. The ABRS for individuals
with a salary range of 8 – 25 lakhs remains at the bottom with a score of 55 making Mumbai
the costliest places to own a property in India. This is largely due to higher increase in the
property value compared to increase in rental value.The recommendation is well
supported by the break even figure of 15+ years. For the income group of 20-25 lacs areas
like Mira Road and Kalyan could be affordable to buy.
Mumbai
Years to save down
payment
2012: 2014:
Rent
10 13
Rank 8
Purchase Price in
Lakhs
2012: 2014:
109.32 163.83
Urgency to Buy:
Rank 8
Sq.Ft / Lakh
2012: 2014:
Buy
9.15 6.1
Rank 8

Pune – Both real estate and rental increase
Pune still largely remains a buyer's market with the property prices increasing at a higher
rate than rental rates. The rental prices in the area have increased by 21.21% over the last 3
years when the property prices have increased by 38.91%. The NHB Residex value for the
Jan – March 2014 quarter is recorded at 232, which is 11 base points higher than the index
value recorded during the same quarter of last year. Compared to the earlier years, Pune
has become costlier, both in renting as well as owning the property. Among the 8 cities,
Pune, now stands at fourth most affordable place to rent while it stand fifth in terms of
affordability to buy compared to last year's ranking of second and third respectively. Being
the neighbor of the most expensive city (Mumbai) and due to comparatively lower
property prices it became a hot destination for the property purchase during the past 2-3
years. It is well represented by the increase in property prices. The vast improvement in job
opportunities in the past also contributed a lot to the property prices as lot of professional
were keen to buy the property and intended to settle down in the city. The years of saving
required to afford buying a property in Pune has increased to 5.60. Based on the previous
year prices, a middle professional needed to save for 5.20 years. A new home buyer in Pune
now gets 9.27% lesser carpet area compared to the previous year and 28% less area when
compared to 2012.Due to the rise in the property prices, the ABRS values of Pune recorded
during this year decreased to 80 making the professionals who fall under salary range of 20 –
25 lakhs, either to buy a property/rent it out as opposed to 90 for professionals earning more
than 15 lakhs during the last year. The incremental rates also had an impact on the break-even
year which is not looking achievable during the loan tenure which is unlike the last
year figure of 15. Some areas like Hadapsar and Kondhwa were found to have cheaper
property rates and proven to be affordable for the individuals having income between 10-
20 lacs per annum.
Pune
Years to save down
payment
2012: 2014:
Rent
4 6
Rank 4
Purchase Price in
Lakhs
2012: 2014:
42.76 59.39
Urgency to Buy:
Rank 5
Sq.Ft / Lakh
2012: 2014:
Buy
23.39 16.84
Rank 5

Ahmedabad – Waiting to be found
Ahmedabad was the new addition in the last year's buy vs rent report by ArthaYantra. The
NHB Residex for Jan – March 2014 quarter has increased by 17 points to end up at 209
compared to last year's value of 192 in the same quarter. Among the 8 cities, Ahmedabad is
the second most affordable place to own a house after Hyderabad and stands at the top
of the table when it comes to renting a home. This year, middle income individual needs to
save for at least 4.10 years to afford the down payment for the house compared 4.80 year's
last year. The city also offers good value for buyer's money who can get around 24.32 sq. ft.
for every 1 lakh spent which is 4.14 sq. ft. more compared to last year. The ABRS value of 87.5
and higher for individuals who earn more than 12 lakhs per annum signifies that such
individuals should opt for buying a property over renting in Ahmedabad.However , the
significant decline in rentals shows a different picture altogether as the break even
becomes difficult during the loan tenure. Amongst all the regions Vastral and Vejalpur were
the most affordable places to own a home.
Ahmedabad
Years to save down
payment
2013: 2014:
Rent
5 4
Rank 1
Purchase Price in
Lakhs
2012: 2014:
49.55 41.12
Urgency to Buy:
Rank 4
Sq.Ft / Lakh
2012: 2014:
Buy
20.18 24.32
Rank 2

7. Conclusion
The ABRS calculator does provides assistance in making a rational decision while
purchasing a property but there are factors which are region specific and are very
important to understand. A lot of cities have indicated indifferent behavior from what the
statistics suggests but such decision are driven by factors which cannot be generalized for
all the cities. Mumbai being the most expensive and unaffordable city to buy is still
preferred by the individuals for buying the property. Delhi and Bangalore have become a
popular choice for renting which is clearly justified by the immigrant population
contributing to the increased demand for the rental properties. Pune also lies in the same
category but being the nearest to the costliest city in the country it is looked as an
alternative residential place which to an extent, increased the property prices in the city.
Ahmedabad and Hyderabad has emerged as a heaven for the salaried individuals as the
prices are very much as per their income levels.
The changing market scenario which might have some favorable impact on the interest
rates for the loans could make buying a bit easier in the coming years as the rate of interest
are expected to go down. The positive outlook on the future of Indian markets would also
impact the job markets and hence the income levels, which might increase the possibilities
to of property buying. Acquiring a property involves long term commitments and
adjustments. Any decision taken in haste could cause long term impact on the personal
finances. It is very important to analyze both sides of buying and renting before going
forward.

8. Limitations
The data is related to following localities of the eight cities:
Delhi NCR: Golf course Road, Sohna Road, Golf course extension Road, Noida – Greater
Noida Express Highway, Noida City, Indirapuram, Faridabad, Safdarjung Enclave, Rohini
Sec – 13, Delhi East, Delhi South, VasantKunj, Friends Colony, Shalimar Bagh, VasantKunj,
Dwarka, MayurVihar Phase 1.
Kolkata: Alipore, PA Shah Road, EM bypass, Lake town, Behala, Howrah, Jodhpur Park,
Jadavpur, Salt Lake City,Maniktla,Bhavanipur,Dhakuria, Behola.
Pune: Wakad, Kharadi, Hadapsar, Hinjewadi, Kondhwa, Pimpri–Chinchwad, Kothrud,
Kasbapeth, Kharodi,Pashar,Chinchwad.
Mumbai: LowerParel, Wadala, Andheri, Ghatkopar, Ghodbunder Road, Kharghar,
Chembur, Borivali West, Bhandup West, Mira Road, Kalyan, Virar, Pokaran Road, Malabar
Hills, MatungaEast,BandraWest, Mulund, Dahisar.
Hyderabad: Banjara Hills, Begumpet, Kondapur, Tellapur, Kukatpally, Miyapur, Rajendra
Nagar, L.BNagar, Tolichowki,Himayatnagar,Tarnaka,Uppal, Srinagar Colony.
Bengaluru: Old Madras Road, Indira Nagar, Bellary Road, Hosur Road, Whitefield, Tumkur
Road, Kanakapur Road, Mysore Road, Lavella Road, Benson Town, Vijaya Nagar,
Madibana.
Chennai: Adyar, Medavakkam, Tambaram, Anna Nagar, Porur, Sholinganallur, Perambur,
K o l a t h u r , C h e t p e t , A s h o k N a g a r , C h r o m e p e t , T h r i u v a n m i y u r , N e h r u
Nagar,Numgambakkam.
Ahmedabad: Motera,Gota, Satellite,Maninagar,Thaltej, Bodakdev, Vatva,Ambawadi,
Sola Road, Chandkheda Gam, Vejalpur, Shilaj, Vastral.
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 80 C is considered as INR 1.5 lakh both in the case
of home ownership and renting.
The tax benefits under section 24B for home buyers is considered as 2 lakhs.
The HRA benefits in case of renting is considered as per the taxation rules based on
average rental prices.
However, the tax calculation for the previous years is taken as per the rules pertaining to
the respective previous years.

9. Appendix - I
FIGURES:
Figure1: National snapshot
Figure 2: Historical values of National Housing Board India Residential Index (NHB Residex)
Figure 3: Average property price and rental values across eight major cities of India
Figure 4: Number of square feet covered per one lakh of amount paid
Figure 5: Number of years required to save the corpus for down payment
Figure 6: Break even horizon for eight major cities of India
TABLES:
Table 1: Affordability to buy rank
Table 2: Affordability to rent rank
Table 3: Urgency to buy rank
Table 4: Factors associated with home ownership and renting
Table 5: Arthayantra Buy vs Rent score explanation
Table 6 : Arthayantra Buy vs Rent Score for different income levels across eight major
cities
Table 7 : Important numbers to look before making a decision.
SOURCES:
 National Housing Board, India: www.nhb.org.in
 Jones Lang LaSalle: www.joneslanglasalle.co.in
 Makaan: www.makaan.com
 Commonfloor: www.commonfloor.com
 Magic Bricks: www.magicbricks.com
 99 Acres: www.99acres.com
 Multiple Primary sources

Appendix - II
Other important numbers to look at before making the decision :
Pune
Ahmedabad Mumbai
Cities Delhi NCR Kolkata Hyderabad Bengaluru Chennai
7 years
growth of
99% 106% 109% 129%
-5% 7% 249%
NHB
residex
Initial
Corpus
required for
owning*(INR)
132%
2,232,8 75
997,008 822,53 2
1,224,958
1,38,9820
No.of
Years to
save for
the
corpus
9 .7
676,915
3,276,722 1,187,982
13.3
4.8 4.1
3.4
5.8
6.5
Average
No.of
sq.ft per
INR
1lakh
8.96
5.6
6.10
20.06 24.32
29.55
16.33
14.39
Initial
corpu s
required
for
renting**
2,34,0 63
16.84
3,22,500
1,63,07 7 1,02,4 92 31,915
1,67,583
1,65,667
0.24
1,45,455
0.22
0.37 0.28
0.36
0.31
0.27
Rent to
buy ratio
Break
Even
year
15+
14 15+
0.28
15+
15+
13
15+
15+
*Inial corpus required for owning = 20% of the Average property price (down payment for home loan)
**Inial corpus required for renng= Amount equivalent to 10 months of rental value (Hyderabad which is 3 months)
*** (Renng the home) / Average out of pocket cost (Owning the home)
The gross income of 8 lakhs per annum is considered.
Table 7: : Important numbers to look before making a decision.

ArthaYantra
A CFO FOR EVERYONE
ArthaYantra is an online personal finance advisor which makes full service wealth
management grade financial advice accessible to middle income families instantly.
Royal Demeure, Second Floor, Plot No. 12/2, Sector-1, HUDA Techno Enclave, Madhapur, Hyderabad - 500081, AP, India.
Phone : +91-040-66588131, Fax : +91-040-66245869. www.arthayantra.com, contactus@arthayantra.com

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