ArthaYantra

BUY VS RENT
REPORT

ABRS

ArthaYantra Buy Vs. Rent Report 2016

www.arthayantra.com

CONTENTS

Pg. No.

1.

Introduction

06

2.

Methodology

07

3.

Assumptions

07

4.

Findings

07

4.1

Historical Data of NHB Residex

07

4.2

Analysis of property prices v/s rental values

08

4.3

Change in property rates & rental values

08

4.4

Aordability-To-Buy and Aordability-To-Rent Ranking

09

4.5

Purchasable Area for Rupees One Lakh

10

4.6

Initial Down Payment

10

4.7

Initial Corpus (security deposit) for Renting

11

4.8

Urgency to Buy ratio

11

5.

ArthaYantra Buy vs. Rent Score ( ABRS)

12

6.

Comparative Analysis of 8 Cities

12-16

7.

Conclusion

17

8.

Limitations

17

9.

Sources & Appendix

18

ArthaYantra Buy vs. Rent Report 2016

Citywise Snapshot

DELHI-NCR
Years for
down payment
10.2

ABRS

BENGALURU
Years for
down payment
5.7
Sq-Feet
per Lakh
16.75

65

Rent
Rs. 8 to 12 lakhs

ABRS

Sq-Feet
per Lakh
8.42

77.5

Neutral
Rs. 13 to 15 lakhs

Buy
Rs. 16 to 25 lakhs ABRS

90

HYDERABAD
Years for
down payment
3.4

CHENNAI
Years for
down payment
6.9

Sq-Feet
per Lakh
13.23

ABRS

Sq-Feet
per Lakh
29.67

55

Rent
Rs. 8 to 15 lakhs

ABRS

55

Rent
Rs. 8 to 24 lakhs

Neutral
Rs. 25 lakhs

ABRS

67.5
Buy
Not Aordable

Rent
Aordable

ABRS

77.5

Neutral
Rs. 8 lakhs

Buy
ABRS
Rs. 9 to 25 lakhs

90

ABRS

67.5

Neutral
Rs. 16 to 19 lakhs

ABRS
Buy
Rs. 20 to 25 lakhs 80

Score
100
90
87.5
80
77.5
75
67.5
<55

Figure: 01

Recommendation
Buy
Buy
Neutral: Recommended to buy
Neutral: Can aord to buy
Neutral: Both buying and renting are aordable.
Rent
Neutral: Can aord to Buy, paying EMI is more expensive
than renting, recommended to rent
Cannot aord to buy or Rent

Pg-03

ArthaYantra Buy vs. Rent Report 2016

Citywise Snapshot

MUMBAI

KOLKATA

ABRS

Years for
down payment
5.3

55

Rent
Rs. 8 to 25 lakhs
Years for
down payment
15.1

Sq-Feet
per Lakh
5.26

Sq-Feet
per Lakh
18.03

Neutral
Not Applicable

Buy
Not Aordable

65

Rent
Rs. 8 to 11 lakhs

ABRS

77.5

Neutral
Rs. 12 to 14 lakhs

ABRS

90

Buy
Rs. 15 to 25 lakhs

AHMEDABAD
Rent
Aordable
Years for
down payment
3.9

PUNE

ABRS

ABRS

90
Buy
Rs. 10 to 25 lakhs

ABRS

55

Sq-Feet
per Lakh
25.45

Rent
Rs. 8 to 13 lakhs
Years for
down payment
6.0
Sq-Feet
per Lakh
15.59

ABRS

67.5

Neutral
Rs. 14 to 16 lakhs

ABRS

80

Buy
Rs. 17 to 25 lakhs

Score
100
90
87.5
80
77.5
75
67.5
<55

Neutral
Rs. 8 to 9 lakhs

ABRS

77.5

Recommendation
Buy
Buy
Neutral: Recommended to buy
Neutral: Can aord to buy
Neutral: Both buying and renting are aordable.
Rent
Neutral: Can aord to Buy, paying EMI is more expensive
than renting, recommended to rent
Cannot aord to buy or Rent

Pg-04

Summary
THE FOURTH ANNUAL
EDITION OF ARTHAYANTRA
BUY VS RENT RESEARCH
COVERS TOP 8 CITIES
ACROSS INDIA.
BENGALURU continues to be favorable for
renting rather than buying, even though
average property rents have increased by
10.08%. The garden city is an aordable
buy destination for people with an annual
income of Indian Rupees (INR) 16 lakhs or
above.

Delhi-NCR

Ahmedabad

CHENNAI continues to be an expensive city

to buy a property. However, an increase in
property prices by 8.78% from last year
has had a negative eect on rental values.
Buying a property here is only suitable for
people with an annual income INR 20
lakhs or above.

Kolkata

DELHI-NCR is the second most expensive

city for both renting and buying a property.
The demand for real estate is still buoyant
and people with an annual income above
INR 25 lakhs can consider buying a
residential property.

Mumbai
Hyderabad

Pune

HYDERABAD remains the most aordable

city for both buying and renting a
residential property. The market is yet to
pick up and still holds first rank in terms of
aordability to rent and aordability to buy
a residential property. Anyone with an
annual income of over INR 9 lakhs can
consider buying a residential property in
this city.

Bengaluru
Chennai

income of INR 25 lakhs cannot aord to

buy a residential property. Therefore, it is
most suitable city for renting a house.
PUNE has seen an increase in both rental
& property prices. There has been an
upswing in the property prices as
compared to last two years. People with
an annual income above INR 17 lakhs can
consider buying a residential property.
KOLKATA is uniquely placed in our findings
as a city having very similar growth across
rentals and property prices. Inspite of this
growth, it is still an aordable city to rent
or buy when compared to Delhi and
Mumbai. People with an annual income
over INR 15 lakhs can buy a house in the
city of joy.
AHMEDABAD like Hyderabad, continues to
be an aordable city for both buying and
renting a residential property. We observe
a demand in rentals since last year. People
with an annual income of INR 10 lakhs and
above can consider buying a residential
property in this city.

MUMBAI is the most expensive city for

both buying and renting a residential
property. Though the real estate market in
the city has had an upward trend, it is still
beyond the reach of a middle income
household. Even someone with an annual
Map not to scale

Pg-05

1.

INTRODUCTION

The real estate sector is one of the most globally recognized sectors. In India, real estate is the
second largest employer after agriculture. The growth of this sector is well complemented by the
growth of the corporate environment and the demand for urban and semi-urban accommodations.
In line with trends in the real estate market, the residential sector, in particular, provides Indians
ample scope to choose whether to buy or rent a property in the city they live in. At the same time,
they do need a reliable tool to assess whether their current financial state coupled with the citys
property prices & rental values guides them to arrive at a pragmatic and rational decision.
Buying a house is considered a significant milestone in ones life, people work hard to realize this
important personal dream, both for investment as well as for emotional reasons. Thus, the idea of
property purchase will have multiple financial implications.
On the other hand, renting a property serves a great alternative to buying one. For urban
professionals, renting is often a convenient option because of the flexibility it oers. Some people
may prefer a lifestyle where they do not want to belong to one place for too long, some may have
transferrable jobs and for these people, renting/leasing a property works favorably.

Consider the below components that determine ones decision of renting/leasing a

property vs. buying:CASH FLOWS
The intent of buying a property is determined by the amount of impact its purchase would have on
individuals cash flow. 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. Whereas, renting would
attract the monthly payment towards rent along with the maintenance cost besides the security
deposit. Rental values year-on-year should not be ignored as they tend to increase. The savings
after such fixed payments will determine whether owning or renting would be a feasible option.
TAX SAVINGS
The net savings after bearing the cost of ownership or renting has a direct impact on tax savings.
Separate sections of the Income Tax, such as Section24 B or Section 80C also determine the
reduction in net payment toward the EMIs. On the other hand renting saves 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.
So considering both the above conditions of owning a house vs. renting a house, the 4th Annual
ArthaYantra Buy v/s Rent (ABR) Report oers a qualitative as well as a quantitative approach for
individuals to decide what is best suited within their budget.
Taking a decision on real estate is way more complicated than expected. And in order to simplify
this complexity, the 4th Annual ABR Report deep dives into the trend of property prices and their
rental value over the past four years across 8 major cities in India. This quantitative methodology
oers individuals with an insight into the options of buying versus renting properties keeping the
best interest of their personal finances.
Pg-06

2.

METHODOLOGY

As part of our research, data was captured from multiple sources like
from National Housing Board (NHB) of India, available real estate reports
and major real estate aggregators.
The methodology used for arriving at the results considers various key parameters
derived from the initial data collected which include price of the residential property,
rental values, years of saving for accumulating down payment, initial security deposit
amount while renting a property and lastly the purchasable area (number of square
feet) per INR 1.0 lakh.

4.

FINDINGS
4.1 Historical data for NHB Residex

National Housing Board Indias Residential Index (NHB

Residex) tracks the movement of prices in the
residential housing segment across India. Figure 02
shows the historical NHB Residex values since its
inception in 2007.

Figure: 02
NHB Residex Trend - 8 Cities

The main idea behind this research is to quantify the buy versus rent decision from a
personal finance perspective. Two major factors which drive the decision are:

400

How much more money does a professional need to shell out for buying a home
compared to renting it?

300

Can the professional aord this additional amount?

350

Hyderabad

250

Chennai
Pune

200

ArthaYantra's Buy vs. Rent Score (ABRS) tries to address these questions and
come up with a comprehensive scoring system. The ABR Score not only tells if it is
better to buy or rent but also tells whether it's aordable to buy or rent.

3.

ASSUMPTIONS

Kolkata

150

Mumbai

100

Bengaluru

50

Delhi-NCR
Ahmedabad

7
00

11

11

11

11

12

12

12

12

3
01

3
01

3
01

3
01

14

14

14

14

15

20
20 00 20 r 20 20
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20 c20 r 20
20 20
20 c20 r 2
ar Jun pt 2 ec
ar un
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un Sep -De Ma -Jun pt
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u
J
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A ul
A ul
O
A
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A
O
Ja
Ja
Ja
Ja
O
J
J

an

The sale price and rental values are calculated for a ready to occupy 1,000 sq. ft.
residential property
Baseline gross annual income for analysis is considered to be INR 8.0 lakhs
Initial down payment amount = 20% of the house price
Tenure for the home loan is considered to be 15 years
Home loan lending rate is considered to be 9.75% per annum
Average savings rate towards residential purchase is 25% of ones annual income.
Monthly EMI to be paid = 50% of monthly take home salary
Property tax = 1.5% of the property value
Property appreciation is not considered for EMI & down payment calculations
Rental security deposit varies depending on the city

Chennai remains unchanged with steepest rise in the index value by

264% from the base year (2007) and a 19.74% increase in index
value over the past four years i.e. from 2012. Pune comes next to
Chennai with a rise in index value by 151% since 2007 and a 38.67%
increase in index value since 2012 i.e. the year of the first ABR
report. This shows that the prices of residential properties are
rapidly growing when compared to last year both at Chennai &
Pune.
On the other hand, Hyderabad has seen de-growth in real estate
prices by 3% since the base year 2007. Mumbai occupies the third
position in real estate growth rate with rise in the index value by
138% from the base year (2007)
Cities like Ahmedabad, Kolkata, Delhi and Bengaluru have seen a
positive trend in real estate growth with rise in the index values by
115%, 112%, 90% and 15% respectively from base year.

Pg-07

4.

FINDINGS

4.

4.2 Trend analysis of Property Prices v/s Rental values

FINDINGS
4.3 Change in Property Rates

The key parameter in determining whether to buy or rent a home is the property cost
vis--vis the rental value. In this study, we compare property prices with rental values for
1,000 sq. ft., ready to occupy house across selected eight cities. The figure below shows
our findings:

Change in prices: 1-year over 4-year trend

Figure: 03
Average Property Price vs Rent
33

18000

30

16000

22

25

19

20

16

16

12000

11

15

12

3,370.51

7,559.51
5,968.47

11,875.88

Be

i
na
en

ur

al
ng

Ch

l
De

6,412.73

19,012.30

CR

-N
hi

d
Hy

ad
ab
er

3,929.38

i
ba

um
M

a
at
lk
Ko

6000
4000

9.76%

8.78%

16.04%

5.55%

6.37%

Pune

Mumbai
Buy

Delhi-NCR

73.91%

7.96%

Hyderabad

9.13%

Kolkata
49.97%

11.27%

-0.42%

-10.46%

Ahmedabad

8.27%

-4.46%

-20.70%

Rent

2000

5,546.81
ne
Pu

-2.55%

10000
8000

10
5

14000

18

Chennai

Bengaluru

20000

Thousands

35

ad
ab
ed

Price Change (from last year)

Price Change (from 2012)

Figure: 04

hm

Mumbai (INR 1.91 crores), Delhi-NCR (INR 1.18 crores) & Chennai (INR 75.6 lakhs) have
been very expensive cities for buying, whereas the rentals have undergone a marginal
change for the past two years. With rising inventory levels in these cities indicates that
the supply that is available is unaordable to many. So, people are left with renting as
an option over buying.
Coming to Bengaluru, inventory remains at the same levels given that buying is not being
considered the top priority, people prefer to rent, and so we observe constant increase
in rental values over the past four years.
When we look at last two year trend at Hyderabad & Ahmedabad, both property prices &
rental values havent undergone a significant change as compared to the other 6 cities.

Since 2012, cities like Mumbai and Pune have seen

aggressive growth in their property prices by 73.91% and
49.97% respectively. Even though property prices are
high in Delhi-NCR, we observe that there is marginal
increase of 6.37% since 2014 which could be due to the
rise in number of incomplete projects & a near stagnation in property prices.
Kolkata is the second city after Mumbai which has seen
significant increase in the property rates since last year
i.e. 11.27%. Hyderabad & Ahmedabad have seen a
negative growth in the property rates since 2014 making
them look attractive as buy opportunities.

Pg-08

4.

FINDINGS

4.

4.3 Change in Rental Values

FINDINGS
4.4 Aordability-to-Buy and Aordability-to-Rent ranking

Figure: 05

Cities are given Aordability-to-Buy (ATB) rank and Aordability-to-Rent (ATR) rank by
considering income factors of an individual, expected EMI to be paid, and renting a
property. The rankings aim to help Indian families to take a sound financial decision on
buying or renting a home.

Rental Change - 1 year vs 4 years trends

Figure: 06

0.6

Aordability-to-Buy (ATB) trend 2012-15

0.5
0.4
0.3
0.2
0.1
0
-0.1

ur

l
ga
en
-0.3 B

-0.2

i
na

en

Ch

CR

-N

hi

l
De

d
ba
ra

de
Hy

i
ba

um
M

ne
Pu

a
at
lk
Ko

ad
ab
ed

hm

2015

2014

2013

2012

--

-0.4

Change ( last year)

Change (from 2012)

Bengaluru

Chennai

Delhi-NCR

Hyderabad

Mumbai

Pune

Kolkata

Ahmedabad

Aordability-to-Rent (ATR) trend 2012-15

Ahmedabad has seen a negative growth in

the property rents since 2012, thus placing
it high on the aordability-to-rent.
Hyderabad has seen a fair increase in the
rental values despite drop in property
prices, which makes this city aordable for
buying a property.
Bengaluru is more favourable towards
renting than buying a property inspite of
seeing a drop in property prices due to its
high-value real estate.

2015

2014

2013

2012

--

Bengaluru

Chennai

Delhi-NCR

Hyderabad

Mumbai

Pune

Kolkata

Ahmedabad

Since 2012, Hyderabad and Ahmedabad have retained their ATB ranking. Cities like Mumbai and
Delhi-NCR stand to be very expensive both in terms of buying and renting a property and this has
been consistent trend year-on-year. Chennai continues to be at 6th position like last year in ATB
ranking while there is step up in the ATR ranking from 5th to 4th position making it better placed
for renting. Pune, over the last four years, has come down in its ATB ranking due to a constant
increase in property prices while it retains the 3rd position for ATR ranking. Bengaluru has
become more attractive in ATB ranking i.e. from 5th position in 2014 to 4th position in 2015 but
remains at 6th position on the ATR ranking. Kolkata remains at 3rd position for ATB but has seen
a drop in its ATR ranking from 4th to 5th position.

Pg-09

4.

FINDINGS

4.

4.5 Purchasable Area for Rupees One Lakh

FINDINGS
4.6 Initial Down Payment

For an Indian middle class family, one primary factor that aects property buying
decision will be the total sq. ft. they get for the allocated budget. Thus, as a part of this
analysis, the area covered (number of sq. ft.) per one lakh Indian Rupees spent will be a
dependable parameter.
We observed that with change in property prices over the last four years impacts the area
covered per one lakh Indian Rupees.

Figure: 07

Before purchasing a house, an average middle class household works hard to create the
corpus i.e. initial down payment. Although the EMIs takes care of 80% of home loan,
accumulating the down payment amount is a very important aspect.
With a recent drop in home loan interest rates by RBI, buying a home has become more
attractive. However, the rate cuts won't lead to any significant rise in sales without
making ready the initial down payment. For this analysis weve assumed the savings rate
of 25% of ones annual income (pre-taxes), the time required to accumulate the corpus
for the down payment is represented in the figure below:

Figure: 08

Sq. Feet per lakh: 4-year trend (2012-15)

Years to downpayment (2012-15)

Ahmedabad
16.0

Kolkata

14.0

Pune

12.0

Mumbai

10.0

Hyderabad

8.0

Delhi-NCR

6.0

Chennai

4.0

Bengaluru

2.0

0.00

5.00

10.00
2015

15.00
2014

20.00
2013

Amongst the 8 cities covered, the drop in

property prices in Bangalore (16.75 sq. ft.) and
Ahmedabad (25.45 sq. ft.) has enabled
increase in area covered as compared to last
year. When we look at the 4-year trend, except
for the cities of Hyderabad and Ahmedabad, all
other cities have seen a considerable decline
in the sq. ft. covered.

2012

25.00

30.00

35.00

0.0

Bengaluru

Chennai

Delhi-NCR

2012

Hyderabad

2013

Mumbai

2014

Pune

Kolkata

Ahmedabad

2015

Households in Mumbai would take 15.1 years

to accumulate the down payment to purchase a
1,000 sq. ft. house. The time required is 1.8
years more than last years. Over the period of 4
years, time required for down payments
increased by 5.5 years which makes it a
challenging task for house purchase in
Mumbai.
Over the past four years, cities like Delhi-NCR ,
Pune, Bengaluru, Chennai and Kolkata have
seen marginal increase in accumulation of
corpus amount. Whereas, Ahmedabad and
Hyderabad have seen reduced number of years
for corpus buildup.

Pg-10

4.

FINDINGS

4.8 Urgency-to-Buy (UTB) Ranking

4.7 Initial Security deposit for Renting

In order to acquire a rental property one has to pay a security deposit as advance which
is calculated as (number of months)*(monthly rental value). Thus, the advance amount
needs to be accumulated before moving in and this varies from city to city depending on
the rental agreement between the landlord and the tenant. Following are the average no.
of months of rent required as an initial deposit amount across 8 cities:

10

KOLKATA

Rent-to-Buy Ratio 0.37

Urgency to Buy Ranking 3

10

CHENNAI
Avg. out of pocket cost (Rent) Rs. 17,288

months

months

CHENNAI

Avg. out of pocket cost (Buy) Rs. 51,582

MUMBAI

10

BENGALURU
Avg. out of pocket cost (Rent) Rs.19,568

months

months

Urgency-to-Buy (UTB) is a ranking that enables people to take an objective decision to

either buy or rent. The UTB ratio indicates what extra payment one has to pay every
month if the property is purchased instead of rented. This ratio 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 EMI. This ratio
is a very good means to understand if property prices are inflated.

Avg. out of pocket cost (Buy) Rs. 65,066

Rent-to-Buy Ratio 0.25

BENGALURU

Urgency to Buy Ranking 6

2
AHMEDABAD

months

DELHI-NCR

DELHI-NCR

months

months

Avg. out of pocket cost (Rent) Rs.22,763

PUNE

Avg. out of pocket cost (Buy) Rs. 1,01,647

Rent-to-Buy Ratio 0.22

Urgency to Buy Ranking 7

months

HYDERABAD

HYDERABAD

Avg. out of pocket cost (Rent) Rs. 12,091

Avg. out of pocket cost (Buy) Rs. 29,565
Rent-to-Buy Ratio 0.39
Urgency to Buy Ranking 1

Figure: 09

Figure: 10
Pg-11

MUMBAI

5.

ARTHAYANTRA BUY VS. RENT SCORE (ABRS)

Avg. out of pocket cost (Rent) Rs.33,556

Avg. out of pocket cost (Buy) Rs. 1,62,127
Rent-to-Buy Ratio 0.20
Urgency to Buy Ranking 8

PUNE
Avg. out of pocket cost (Rent) Rs. 16,843
Avg. out of pocket cost (Buy) Rs. 55,347
Rent-to-Buy Ratio 0.29
Urgency to Buy Ranking 5

KOLKATA
Avg. out of pocket cost (Rent) Rs. 19,181

ArthaYantras Buy vs. Rent Score (ABRS) is an eort to seamlessly integrate the various
decision parameters like Aordability-To-Buy, Aordability-To-Rent and Urgency-To-Buy
considered for purchase or renting a house.
The property price and rental value of the place determines if one should rent or buy the
place. They have an impact on the cash flows of a household (be it rent or EMI), the tax
benefits availed and other lifestyle decisions.
ABRS is a powerful tool to logically compare rentals and/or property prices across cities.
In a way, one can arrive at the pros and cons of renting and/or buying a house in a
particular city/region. As a part of this research report we have considered the average
property prices and rental values of the localities and calculated the ABR Score across
dierent salary groups.
SCORE

100

Buy

90

Buy

87.5

Neutral: Recommended to buy

80

Neutral: Can aord to buy

77.5

Neutral: Both buying and renting are aordable.

75

Rent

67.5

Neutral: Can aord to Buy; As paying EMI is more expensive than renting,
Renting is recommended

<55

Cannot aord to buy or Rent

Avg. out of pocket cost (Buy) Rs. 48,009

Rent-to-Buy Ratio 0.39
Urgency to Buy Ranking 2

AHMEDABAD
Avg. out of pocket cost (Rent) Rs. 12,592
Avg. out of pocket cost (Buy) Rs. 34,301
Rent-to-Buy Ratio 0.35
Urgency to Buy Ranking 4

Figure: 11

RECOMMENDATION

*Maintenance cost of INR 1,000 per month added to all cities.

Income(INR)

Mumbai has the least UTB ranking which means that renting a home is the best
option here. Kolkata and Hyderabad have shown similar trend in Urgency to buy
despite dierence in their property prices.

8 lakhs

65

55

55

77.5

55

55

10 lakhs

65

55

55

90

55

12 lakhs

65

55

55

90

55

65

77.5

55

65

90

55

77.5

90

15 lakhs

77.5

55

55

90

55

67.5

90

90

20 lakhs

90

80

55

90

55

80

90

90

25 lakhs

90

80

67.5

90

55

80

Bengaluru

Chennai

Delhi-NCR

Hyderabad

Mumbai

90
Pune

90
Kolkata

Ahmedabad

Pg-12

COMPARISON WITH PREVIOUS YEARS

6.2. Chennai Aordable renting over buying

Chennai, a hub for both manufacturing units & services enterprises, continues to witness a growth (5.5%) in
real estate prices since 2012 while the rentals values increased by 8.89%, in line with inflation, for the same
period.

6.1. Bengaluru - Rising Rental Yields

The IT capital of India has seen buoyant growth in the job market leading to an increased demand for rental
houses inspite of a drop in the property prices. It remains to be the most popular IT job destination vis--vis
Pune, Hyderabad & Chennai for IT/ITES professionals hailing from tier-2 and tier-3 cities of India. Over the past
four years, though the property prices have grown by 9.76%, on year-on-year comparison, the property prices
have dropped by 2.55% since 2014. This drop is because of real estate developers finding it dicult to sell
units and thus bringing in a price correction.
The city has seen steeper growth in rental values as compared to the property prices. This shows a drop of
citys Aordability-to-Rent rank from 3rd last year to 6th position this year. In terms of the Aordability-to-Buy
rank (4th in 2015), it still not in the top 3. The years required for down payments have decreased slightly to 5.67
years this year leading to a marginal increase in area covered per one lakh rupees.

Of the 8 cities, Chennai, besides Mumbai & Delhi-NCR, remains to be an expensive destination for property
purchase making it occupy the 6th position (since 2013) on the Aordability-to-Buy ranking. On the other
hand, due to marginal drop (1.7% since 2014) in rental values, the city remains aordable for renting.
Chennais Aordability-to-Rent ranking is 4th, a step-up from its previous year.
There has been a slight increase in the years needed to accumulate the initial down payment while the
purchasable area per one lakh rupees has reduced by 8%.
The ABR Score of Chennai recommends a buy for people having average annual incomes of INR 20 lakhs and
above. Nevertheless, areas like Medavakkam and Chrompet are still attractive buys for people with average
annual incomes below INR 20 lakhs.

ABRS suggests that a person having an average annual income over INR 15 lakhs can plan to buy a residential
property in the city, while some areas like Hosur Road and Whitefield look aordable for other income groups.

Bengaluru

2015

18.39
5.3

16.01
5.9

16.33
5.8

16.75
5.8

2013

2014

2015

13.96
6.7

13.15
7.0

14.3
6.5

13.23
6.9

Affo

Ur

Apr-Jun 2007

Jul-Sept 2007

Oct-Dec 2007

100

100

100

100

Jan-Mar 2011

Apr-Jun 2011

Jul-Sept 2011

Oct-Dec 2011

88

92

93

100

Jan-Mar 2012

Apr-Jun 2012

Jul-Sept 2012

Oct-Dec 2012

92

100

98

106

Jan-Mar 2013

Apr-Jun 2013

Jul-Sept 2013

Oct-Dec 2013

109

108

107

111

Jan-Mar 2014

Apr-Jun 2014

Jul-Sept 2014

Oct-Dec 2014

107

108

109

113

115

uy

Jan-Mar 2007

Jan-Mar 2007

Apr-Jun 2007

Jul-Sept 2007

Oct-Dec 2007

100

100

100

100

Jan-Mar 2011

Apr-Jun 2011

Jul-Sept 2011

Oct-Dec 2011

218

248

271

296

Jan-Mar 2012

Apr-Jun 2012

Jul-Sept 2012

Oct-Dec 2012

304

309

312

314

Jan-Mar 2013

Apr-Jun 2013

Jul-Sept 2013

Oct-Dec 2013

310

303

318

330

Jan-Mar 2014

Apr-Jun 2014

Jul-Sept 2014

Oct-Dec 2014

349

355

362

366

Jan-Mar 2015

Change from base

year 2007 : 15%

NHB Residex - Chennai

NHB Residex - Bengaluru

Jan-Mar 2015

ncy to b
ge

ability to
rd

nt
re

ability to
rd

y
bu

ncy to b
ge

uy

nt
re

ability to
rd

Sq.Feet per lakh

Years to downpayment

2012

Ur

2014

Affo

2013

bility to
da

Figure: 13

Figure: 12

2012

y
bu

Affo
r

Sq.Feet per lakh

Years to downpayment

Chennai

Affo

Change from
year 2012 : 25%

364

Change from base

year 2007 : 264%

Change from
year 2012 : 19.74%

Pg-13

6.3. Delhi - NCR - Rents are increasing

6.4. Hyderabad The Most Aordable Market

The National Capital Region (NCR) remains to be the second most expensive region to own a home in India. The
average rental value of Delhi, over the last four years, has increased by 20% whereas the average property
prices increased by 9.1% for the same period. Being a highly preferred city for both education & jobs in North
India, Delhi-NCR experiences high amount of immigration from neighboring states making rentals values
steadily increase year-on-year.
On the Aordability-to-Rent as well as Aordability-to-Buy ranking, Delhi-NCR holds the 7th position. So, a
person aspiring to own a Dream House, with an annual earning of INR 8 lakhs, requires a little over 10 years
(10.2 years) to accumulate the down payment corpus besides living with 6% lesser carpet area when compared
to 2014.
The ABRS proposes Delhi-NCR to be a rental city for individuals having average annual income between INR 8
lakhs & INR 25 lakhs. And areas like Noida, Greater Noida Expressway and Indirapuram (Ghaziabad) are
favorable for renting despite increased travel time to work locations

8.5
10.1

Affordability
to buy

8.9
9.7
8.4
10.2

Affordability
to rent

2014

2015

26.5
3.8

23.9
4.1

29.5
3.4

29.6
3.4

Affordability
to rent

Urgency
to buy

NHB Residex - Hyderabad

Jan-Mar 2007

Apr-Jun 2007

Jul-Sept 2007

Oct-Dec 2007

100

100

100

100

Jan-Mar 2011

Apr-Jun 2011

Jul-Sept 2011

Oct-Dec 2011

126

147

154

167

Jan-Mar 2012

Apr-Jun 2012

Jul-Sept 2012

Oct-Dec 2012

168

172

178

195

Jan-Mar 2013

Apr-Jun 2013

Jul-Sept 2013

Oct-Dec 2013

202

199

190

196

Jan-Mar 2014

Apr-Jun 2014

Jul-Sept 2014

Oct-Dec 2014

199

193

189

189

Change from base

year 2007 : 90%

2013

Affordability
to buy

Figure: 15

2012

NHB Residex - Delhi-NCR

190

Hyderabad

Urgency
to buy

Jan-Mar 2015

ABRS suggests that a person having an average annual income of INR 9 lakhs and above can plan to buy a
residential property across most of the real estate development areas in and around the city.

Sq.Feet per lakh

Years to downpayment

2014

Sq.Feet per lakh

Years to downpayment

To an extent, the bifurcation of Andhra Pradesh & the formation of Telangana State hasnt positively impacted the
real estate market in Hyderabad. Nonetheless, this city keeps its 1st position in both Affordability-to-Rent &
Affordability-to-Buy ranking. Also, an individual will take 3.4 years to accumulate the initial down payment, the
lowest among the 8 cities.

Figure: 14
2014

9.1
9.5
2013

2012

Delhi - NCR

Since the inception of ABRS Report in 2012, Hyderabad has been rated as the most affordable city both in terms of
renting and buying a residential property. With a relatively stagnant real estate market, this city has become
attractive destination for purchasing a residential property. Over the past 4 years, the property prices declined by
10.46% whereas the rental values have increased by 6.3% for the same period. People belonging to any income
groups can lead a comfortable lifestyle here.

Change from
year 2012 : 13.10%

Jan-Mar 2007

Apr-Jun 2007

Jul-Sept 2007

Oct-Dec 2007

100

100

100

100

Jan-Mar 2011

Apr-Jun 2011

Jul-Sept 2011

Oct-Dec 2011

83

91

84

79

Jan-Mar 2012

Apr-Jun 2012

Jul-Sept 2012

Oct-Dec 2012

86

85

84

90

Jan-Mar 2013

Apr-Jun 2013

Jul-Sept 2013

Oct-Dec 2013

88

84

88

93

Jan-Mar 2014

Apr-Jun 2014

Jul-Sept 2014

Oct-Dec 2014

95

93

95

95

Jan-Mar 2015
97

Change from base

year 2007 : -3%

Change from
year 2012 : 12.79%

Pg-14

6.5. Kolkata Steady trend

6.6. Mumbai Zooming real estate price

In the city of joy rental values have followed the same trend as property prices between 2012 and 2015. Over the
past year, property prices and rental values have grown by 11.27% and 11.48% respectively.

This city retains the title of being the most high-priced place to buy a home as well as most expensive place to rent.
The property prices zoomed by 74% since 2012 whereas it had a growth of 16% from last years findings.
Compared to the 2012, the average rentals has increased by 14.14%.

The Affordability-to-Buy ranking remains at 3rd position like in 2014 while the Affordability-to-Rent ranking slipped
to 5th position from 4th position (2014) indicating that the city is becoming a little more expensive to rent. The
years required for accumulating the initial down payments has increased slightly to 5.30 years. Also, we observe
there is 10.13% decrease in purchasable area per one lakh rupees over last year.
ABRS suggests that a person having an average annual income of INR 15 lakhs and above can purchase a
residential property in the city, while some areas like Howrah and Behola look affordable for other income groups.

Kolkata

Figure: 16

Being the financial & commercial capital of India, the city has increased demand for real estate prices despite the
fact that the prices are now beyond the reach of a salaried professional having average annual income of INR 25
lakhs.
In terms of Affordability-to-Buy & Affordability-to-Rent ranking the city comes at the bottom of the table at 8th
position. The years of saving required to create the down payment corpus is 15.1 years which is a good 1.8 years
over 2014. On other hand, due to increased prices the area covered for every lakh rupee spent also shrunk to 5.26
sq. ft. which is 13.9% less over 2014.
The ABR Score for individuals with a salary range of INR 8 lakhs and INR 25 lakhs remains at the bottom with a score
of 55 making Mumbai unaffordable to own a property in India. Although, some areas like Virar and Kalyan can offer
some low cost homes for professionals under the annual salary range of INR 25 lakhs.

Mumbai
2012
Sq.Feet per lakh
Years to downpayment

Affordability
to buy

2013

19.5
5.0

15.6
6.0

Affordability
to rent

2014

2015

20
4.8

18.03
5.31

2013

2014

2015

9.5
9.6

7.5
11.3

6.10
13.3

5.26
15.12

Sq.Feet per lakh

Years to downpayment

Affordability
to rent

Affordability
to buy

Urgency
to buy

2012

Urgency
to buy

8
NHB Residex - Mumbai

NHB Residex - Kolkata

100 Jan-Mar 2007 100 Jan-Mar 2007 100 Jan-Mar 2007 100 Jan-Mar 2007

Jan-Mar 2007

Apr-Jun 2007

Jul-Sept 2007

Oct-Dec 2007

100

100

100

100

Jan-Mar 2011

Apr-Jun 2011

Jul-Sept 2011

Oct-Dec 2011

175

181

194

193

Jan-Mar 2012

Apr-Jun 2012

Jul-Sept 2012

Oct-Dec 2012

190

197

198

217

Jan-Mar 2013

Apr-Jun 2013

Jul-Sept 2013

Oct-Dec 2013

211 Jan-Mar 2011

194 Apr-Jun 2011

191 Jul-Sept 2011 190 Oct-Dec 2011

191 Jan-Mar 2012

196 Apr-Jun 2012

191 Jul-Sept 2012 209 Oct-Dec 2012

222

221

222

222

197 Jan-Mar 2013

189 Apr-Jun 2013

199 Jul-Sept 2013 196 Oct-Dec 2013

Jan-Mar 2014

Apr-Jun 2014

Jul-Sept 2014

Oct-Dec 2014

206 Jan-Mar 2014

211 Apr-Jun 2014

209 Jul-Sept 2014

229

233

238

240

212 Jul-Sept 2015

Change from base

year 2007 : 112%

Figure: 17

215 Oct-Dec 2014

Change from
year 2012 : 10.99%

Jan-Mar 2015
238

Change from base

year 2007 : 138%

Change from
year 2012 : 25.26%

Pg-15

6.7. Pune Both real estate and rental increase

6.8. Ahmedabad Waiting to be found

Over the past 4 years, Pune had seen a 32% rise in rentals and a 50% rise property prices. Among the 8 cities, Pune,
now stands at 5th position in Affordability-to-Buy ranking and 3rd position in terms of Affordability-to-Rent
ranking.

In Ahmedabad, the real estate is growing at slower pace compared to rest of the 8 cities, thus, making this city
aordable for buying and renting a residential property. Over the past three years, though the property prices
have grown by 13%, on year-on-year basis, the property prices have dropped by 4% since 2014.

Pune, an educational hub and a vibrant job destination for core engineering & IT/ITES professionals, has been in
demand for both house purchase and rentals. The number of years required to create the down payment corpus
for Pune has increased to 6 years from 5.6 years in 2014. For the past 4 years, the purchasable area has reduced by
33.3%.

Even though the city has seen sharper growth in rental values as compared to the property prices, there is a
drop in citys Aordability-to-Rent ranking from 1st (2014) to 2nd position this year as Hyderabad remains to be
most aordable rental city. In terms of the Aordability-to-Buy rank, Ahmedabad stands at 2nd position this
year, it is still among the most aordable cities to buy. The years required for accumulating the down payment
corpus are 3.9 years this year and the purchasable area per one lakh rupees is 25.45 sq. ft., which is second
highest amongst the 8 cities.

Individuals earning an average annual income of INR 17 lakhs and above can afford to buy a home. Some areas like
Hadapsar and Hinjewadi were found to have cheaper property rates and prove to be affordable for the individuals
having average annual income between INR 14 to INR 17 lakhs.

Pune

Figure: 18

2012

2013

2014

2015

23.3
4.3

18.5
5.2

16.8
5.6

15.5
6.03

Sq.Feet per lakh

Years to downpayment

Affordability
to rent

Affordability
to buy

ABRS advocates that a person having an average annual income of INR 10 lakhs & above can buy a residential
property in this city, while some areas like Vastral and Vatva look aordable for other income groups.

Ahmedabad

Sq.Feet per lakh

Years to downpayment

Urgency
to buy

Affordability
to buy

Jan-Mar 2007

Apr-Jun 2007

Jul-Sept 2007

Oct-Dec 2007

100

100

100

100

Jan-Mar 2011

Apr-Jun 2011

Jul-Sept 2011

Oct-Dec 2011

148

150

169

184

Jan-Mar 2012

Apr-Jun 2012

Jul-Sept 2012

Oct-Dec 2012

181

200

201

205

Jan-Mar 2013

Apr-Jun 2013

Jul-Sept 2013

Oct-Dec 2013

221

219

219

235

Jan-Mar 2014

Apr-Jun 2014

Jul-Sept 2014

Oct-Dec 2014

232

241

242

247

251

Change from base

year 2007 : 151%

2013

2014

2015

20.18
4.8

24.32
4.1

25.45
3.90

Affordability
to rent

Urgency
to buy

NHB Residex - Ahmedabad

NHB Residex - Pune

Jan-Mar 2015

Figure: 19

100

Jan-Mar 2007

100

Apr-Jun 2007

100

Jul-Sept 2007

100

Oct-Dec 2007

165

Jan-Mar 2011

169

Apr-Jun 2011

163

Jul-Sept 2011

167

Oct-Dec 2011

164

Jan-Mar 2012

174

Apr-Jun 2012

180

Jul-Sept 2012

191

Oct-Dec 2012

192

Jan-Mar 2013

186

Apr-Jun 2013

191

Jul-Sept 2013

197

Oct-Dec 2013

209

Jan-Mar 2014

213

Apr-Jun 2014

217

Jul-Sept 2014

215

Oct-Dec 2014

215

Oct-Dec 2015

Change from base

year 2007 : 115%

Change from
year 2012 : 11.98%

Change from
year 2012 : 38.68%

Pg-16

Conclusion

Limitations

The current economic scenario along with the ongoing trend in the realty
market make the Buy v/s Rent decision a little more complex for individuals.
Among the top 8 cities researched in this report, Mumbai and Delhi-NCR
clearly stand out as cities where buying a home has gone beyond the reach of
individuals earning even up to INR 25 lakhs per annum.

In each of the eight cities, data for analysis has been collected for the
below mentioned localities:

The purchasable area per one lakh rupees has increased for the cities like
Hyderabad and Ahmedabad, making them attractive destination for buying a
residential property. While the rest of the cities have seen decrease in
purchasable area per one lakh rupees, thus making us to conclude that the
real estate market, by and large hasnt seen significant growth inspite of the
interest rate cut by RBI and tax slab changes in the recent past.

CHENNAI: Adyar, Medavakkam, Tambaram, Anna Nagar, Porur, Sholinganallur, Perambur,

Kolathur, Chetpet, Ashok Nagar, Chromepet, Thriuvanmiyur,Nehru Nagar and
Nungambakkam.

Builders might not be passing on the benefits of lower interest rates to the
end user and are holding on to their prices, while developers continue to
launch spacious units. This has led to a mismatch in what the market wants
and what is being developed/oered. In all, it discourages the price-sensitive
individuals from taking a buy decision on residential properties. Also, it
implies that there is a need for price correction as sales are declining and
leading to a pile up of inventories.
As a cost-eective alternative, Hyderabad and Ahmedabad continue to be the
most sought after cities for both renting and buying for people having annual
earning of INR 10 lakhs or more. However, in Pune and Bengaluru, the salary
threshold to buy a home starts when the annual income is around INR 20
lakhs. These cities today oer a good buying alternative for Mumbai and
Delhi-NCR based professionals earning similar annual salaries
The economic value for a person in buying a home across the selected 8 cities
is being lessened given a combination of factors like steep rise in property
prices year-on-year, preference to rent over buy, reduced purchasable area
and longer duration to accumulate the initial corpus.
Buying a home without clear economic benefits can be detrimental to the
financial well-being of the buyer. We recommend that ABRS should be used as
the mainstay tool to arrive at a more objective decision on whether to buy or
rent a property.

BENGALURU: Old Madras Road, Indira Nagar, Bellary Road, Hosur Road, Whitefield,
Tumkur Road, Kanakapur Road, Mysore Road, Lavella Road, Benson Town, Vaya Nagar.

DELHI-NCR: Golf Course Road, Sohna Road, Golf Course Extension Road, Noida & Greater
Noida Express Highway, Noida City, Indirapuram, Safdarjung Enclave, Rohini Sector 13,
Delhi East, Delhi South, Friends Colony, Shalimar Bagh, Vasant Kunj, Dwarka, Mayur
Vihar Phase 1.
HYDERABAD: Banjara Hills, Begumpet, Kondapur, Tellapur, Kukatpally, Miyapur, Rajendra
Nagar, L B Nagar, Tolichowki, Himayatnagar, Tarnaka, Uppal, Srinagar Colony.
MUMBAI: Lower Parel, Wadala, Andheri, Ghatkopar, Ghodbunder Road, Kharghar,
Chembur, Borivali West, Bhandup West, Mira Road, Kalyan, Virar, Pokaran Road, Malabar
Hills, Matunga East,Bandra West, Mulund, Dahisar.
PUNE: Wakad, Kharadi, Hadapsar, Hinjewadi, Kondhwa, Pimpri Chinchwad, Shivaji
Nagar, Pimple Saudagar, Baner, Kharodi, Pashar, Chinchwad, Kothrud.
KOLKATA: Alipore, Behola, EM Bypass, Howrah, Jadavpur, Jodhpur Park, Lake Town,
Maniktala, Bhavanipur, Dhakuria, Salt Lake City.
AHMEDABAD: Motera, Gota, Satellite, Maninagar, Thaltej, Bodakdev, Vatva, Ambawadi,
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 benets received under section 80 C is taken at INR 1.5 lakhs
The tax benets under section 24 B for home buyers is considered as
INR 2.0 lakhs
The HRA benets in case of renting is considered as per the taxation
rules based on average rental prices
However, tax calculation for the previous years is taken as per rules pertaining
to the respective previous years

Pg-17

9.

Sources and Appendix

Sources

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

Makaan: www.makaan.com
Commonoor: www.commonoor.com
Magic Bricks: www.magicbricks.com
99 Acres: www.99acres.com
Housing: www.Housing.com

Figure 01 : City wise Snapshot

Figure 02: NHB Residex trend-8 cities
Figure 03: Avg. Property price and rental values across 8 major cities
Figure 04: Change in property prices 1 year over 4-year trend
Figure 05: Rental change - 1 year versus 4 year trend
Figure 06: Aordability-to-Buy and Aordability-to-Rent ranking trends
Figure 07: Square feet per lakh: 4 year trend (2012-15)
Figure 08: Years to down payment: 2012-15
Figure 09: Initial rental security deposit
Figure 10: Urgency-to-Buy ranking
Figure 11: Arthayantra Buy vs Rent Scorecard
Figure 12: Bengaluru
Figure 13: Chennai
Figure 14: Delhi-NCR
Figure 15: Hyderabad
Figure 16: Kolkata
Figure 17: Mumbai
Figure 18: Pune
Figure 19: Ahmedabad
Figure 20: Important numbers to look at before making a decision

Appendix - Figures

Pg. No.
03, 04
07
08
08
09
09
10
10
11
11, 12
12
13
13
14
14
15
15
16
16
18

www.arthayantra.com
e-mail: care@arthayantra.com
Ph.: +91 40 66 588 259

Important Numbers to look at before making a decision

8 Year NHB Index Growth

15%

264%

90%

-3%

138%

112%

151%

115%

Initial Corpus

11,93,694

15,11,902

23,75,175

6,74,102

38,02,459

11,09,361

12,82,546

7,85,875

No of Years

5.7

6.9

10.2

3.4

15.1

5.3

3.9

Avg. sq. feet per lakh

16.75

13.23

8.42

29.67

5.26

18.03

15.59

25.45

Initial Corpus for renting

1,85,681

1,62,883

65,287

33,273

3,25,555

54,541

95,055

23,183

Rent-to-buy ratio

0.37

0.25

0.22

0.39

0.20

0.39

0.29

0.35

Hyderabad

Mumbai

Bengaluru

Chennai

Delhi-NCR

Kolkata

Pune

Ahmedabad

Figure: 20
ArthaYantra Corporation Pvt. Ltd. Registered and Corporate Address: 3rd floor , Sai Galleria, Plot No. 472, Road no. 36, Jubilee Hills,
Hyderabad, India 500 033 CIN: U74900TG2007PTC053246 Ph.: +91 99590 21949 e-mail: enquiries@arthayantra.com website: www.arthayantra.com

Pg-18