With rents in Mumbai shooting through the roof, more and more people now prefer to buy houses in the distant suburbs rather than seek accommodation on lease. Ameya Bhise finds out how spiralling rents are driving a changing real-estate trend.
Two years ago, 27-year-old Ajay Gupta, an IT professional, came to Mumbai from Uttar Pradesh. With no base in Mumbai, he started looking for a house he could rent. But the steep rents came as a shock to him.
A few basic calculations were all it took for Gupta to change his plans. He realised that buying a house funded by a bank loan would cost him just as much as renting one. “I could buy a flat in a developing locality instead of renting one in a developed one,” says Gupta.
He zeroed in on an under-construction building in Malad. “I chose Malad since it has everything from malls to IT parks. I knew the area would develop," says Gupta.
He took a loan for 40 per cent of the capital value of the flat at 15 per cent interest on the reducing balance method. With this, he clubbed his savings to buy a 580 sq ft 1-BHK flat for Rs 11 lakh. “I stayed with my relatives for a year, while the building was under constructon. That way, I also managed to save some money,” says Gupta.
Today, Gupta pays an equated monthly instalment (EMI) of Rs 5,400, which is far less than the rent in Malad. Besides, he is the proud owner of a house that is worth almost Rs 30 lakh, going by current property prices. “I made a smart decision,” he says. “Had I opted to live on rent, I would have been paying through my nose.”
An increasing number of Mumbaikars are employing Gupta's strategy. With rents skyrocketing, they see buying property in the suburbs as a more viable proposition than living as tenants in someone else’s house.
In places like Malad, Borivali and Mira Road, leasing a house for a year (including broker's commission, security deposit, rent and other miscellaneous charges) works out to nearly as much as buying one with a bank loan.
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