Are Tenants Losing Money?

  • 4 months ago
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Owning a home is a huge part of someone’s life. Well, it is considered a dream of an individual. Choosing between owning a purchased home or a rented home is a big decision for any individual. With the rise in real estate year after year, more and more people choose to rent a house rather than buying it. So, the financial status of a person depicts whether a person can buy or rent a house. But in both cases, it gives a place to live with the requirement of regular income so that payments can be made.

According to RICS – Knight and Frank report, 50% of people in India live in their own houses, while almost 30% of people live in rented houses and 13% live in their parent’s houses. “Homeownership in India is seeing two interesting trends – at one hand the affordable housing policy of government is expeditiously allowing lower-income households to dream of ‘self-owned home’ while on the other hand, the younger urban generation prefers to go by a minimalistic approach- opting for rental housing. This new generation does not want to tie themselves down with hefty home loans and also deal with the stress that goes along with investing in under-construction property. While RERA is putting checks and balances in place, fewer people want to deal with project delays and issues around delivery,” stated Nimish Gupta, FRICS, MD, South Asia, RICS.

There are various differences between buying a home and renting a property. Homeownership brings many benefits, such as sense of stability and pride of ownership. On the contrary renting offers flexibility, predictable monthly expenses, and someone to handle repairs. Owning a home is not always better than renting a house and renting a house is not always simple as it seems. Tenancy brings various disadvantages, among which “tenants losing their money” is the major drawback of renting a house.

How tenants lose money?

1.     NO RETURN ON MONEY PAID

While renting a property, the money of tenants does not grow. The rental paid by tenants is neither long-term security nor savings for them. Homeowners can make money by renting their properties. So, renting a house can be used as a way of getting back returns on money invested in real estate by homeowners. On the flip hand, tenants are also investing in real estate by paying rent for the place in which they are staying but they are not getting returns on it. They are not getting the appreciation of property that the landowner is enjoying. The rent that they are paying can be used by homeowners as a source of extra income or loan payments. Hence the investment made by homeowners in real estate is growing yet making tenants lose their money by supporting landowners in paying loan payments or earning extra money in form of rentals paid. The value of assets that got increased with time is missed out by tenants although they are paying for staying in that property.

2. INCREMENT IN RENT ANNUALLY

Another way in which tenants lose their money is when there is annual increase in rent. Landlords usually renovate their house a little bit every year due to which the rent amount goes up. So, tenants have to pay more money for the same place every year. Not only this if the value of the asset is inclined by some developments around that area, then homeowners again made some changes in rent which again disturbs tenants’ financial condition. For example, if any highway is getting constructed near that area or some malls are built near that property then the value of that property got increased which ultimately gives profit to the owner. But for tenants, those developments do not work as a boon. Those developments lead to increase their rent as more the value of property, rent would be the more. This is how tenants again lose some money.

3. NO TAX INCENTIVES

A lot of money can be saved in form of tax deductions. Homeowners who bought home with the help of home loans can be benefited from tax deductions. But renters staying in that same amount cannot get those tax deductions. They have to pay the tax to the government according to their income along with rent to landowners. So, in both ways, tenants are losing money. The amount paid in form of rent can be used as the amount paid for the lease for their own house. This will not only give them the opportunity to buy their own house but also to enjoy tax deductions which ultimately saves their money.

Besides losing money, tenants also face some other problems while renting a house. There is always an emotional connection between an individual and their HOME but renters never get that emotional satisfaction from a rented house. As tenants never customize that property according to their own will. All the interiors and architecture are approved by homeowners so tenants have to live according to their desires. For instance, if renters want to paint the walls according to their choice; either they have to get approval for re-painting the walls or they have to drop that idea. Everyone wants to live their own life without someone’s interference or being told by someone what to do. But renting a house automatically leads to depend on landlords. Tenants’ own lifestyle would be limited as they have to follow the homeowners’ lifestyle.

 

So homeownership automatically bring various tangible and non-tangible benefits. One can not only have its own HOME but also enjoys various benefits from that home. An individual can only get financial merits along with the opportunity to decide the looks and designs of the house. Last but not the least, homeownership always brings sense of stability and pride of ownership. So, investing in real estate is always a lucrative investment.  


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