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A curious phenomenon I have noticed only in India is that rental yields tend to be much lower than any other country. Arguably, if renting is so cheap, it makes

A curious phenomenon I have noticed only in India is that rental yields tend to be much lower than any other country. Arguably, if renting is so cheap, it makes more sense to rent than own a house, unless property is expected to appreciate in value indefinitely.

kumarvvr 5y ago
One reason for less rentals, is the cultural norm of home ownership, which is often seen as a very reliable and solid sign of income stability. Another reason is lack teeth in laws that implement rental agreements. In fact, most owners hardly take any rental agreements or leases.
solarkraft 5y ago
Yeah, but one doesn't want to rent because owning a home is an investment ... and that's how we end up with the price :-) This must be great for people who like to move around a lot.
kumarvvr 5y ago
Most homes are purchased for the purpose of living in them. Additionally, monthly rental income is less than a quarter of loan payments, assuming 80% of total is taken as loan, which is true in most cases. Loan tenures are about 25 years, so most families take a home and pay the loans during their active service life. About 10 or 15 years down the line, one or two floors are added to tge house, for rental purpose. Here too, rental is less than half of construction cost. Again, intent is for very long term appreciation of the asset, rather than a passive income source.
- andrepd 5y ago
  > Most homes are purchased for the purpose of living in them. [citation needed]
  - dslkfjg 5y ago
    The number of people who buy homes to live in them greatly exceeds the number of people who buy homes as investments. That seems obvious to me. The only way most housing could be investment property is if investment vehicles each had so many houses, literally tens or hundreds of thousands, that their total ownership exceeded that of ordinary people . As it turns out, this is not the case: https://www.statista.com/statistics/187576/housing-units-occupied-by-owner-in-the-us-since-1975/ https://www.statista.com/statistics/187576/housing-units-occ...
    - pbhjpbhj 5y ago
      Perhaps the parent is suggesting that people might only buy because it's also an investment and would otherwise rent? FTSE100 appears to have doubled in 20 years, my house in a poor UK city has quadrupled in value. Starting wages have increased by about 70%.
  - kumarvvr 5y ago
    I myself am an example, so is everyone in my social circle. edit: Also Myth 5 in the following article. https://economictimes.indiatimes.com/news/et-explains/six-myths-about-buying-a-home-in-india-you-need-to-stop-believing/articleshow/66553020.cms?from=mdr https://economictimes.indiatimes.com/news/et-explains/six-my... Edit 2: An 1800 sft, duplex house, built in a 150 square yard property, cost about Rs. 13 million. And that is in a city like Hyderabad. Costs about double that in Bangalore, the top IT city in India and probably more in a city like Mumbai & New Delhi. An average salary of an IT employee, with about 10 years of experience is about Rs. 3 million per year. Banks give a loan of about Rs. 10 million on that house, and employees usually source the remaining amount from further loans or high interest borrowings. Cumulatively, with current interest rates (have been stable for a decade now), EMI on a 13 million loan is about 0.13 million per month, meaning more than half of an employees salary, 1.56 million, goes to EMI payments. Average rental value for that property is about Rs. 25000 per month, or Rs. 0.3 million per year. So hardly enough for covering EMI. Tenure on the loan is usually 20 to 30 years. So, for most families, with wife and husband working, owning one house is within reach, but two is beyond capacity. With so much of income going to EMI, most choose to stay in the house rather than rent it out.

kumarvvr 5y ago

One reason for less rentals, is the cultural norm of home ownership, which is often seen as a very reliable and solid sign of income stability. Another reason is lack teeth in laws that implement rental agreements. In fact, most owners hardly take any rental agreements or leases.

solarkraft 5y ago

Yeah, but one doesn't want to rent because owning a home is an investment ... and that's how we end up with the price :-) This must be great for people who like to move around a lot.

kumarvvr 5y ago

Most homes are purchased for the purpose of living in them. Additionally, monthly rental income is less than a quarter of loan payments, assuming 80% of total is taken as loan, which is true in most cases. Loan tenures are about 25 years, so most families take a home and pay the loans during their active service life. About 10 or 15 years down the line, one or two floors are added to tge house, for rental purpose. Here too, rental is less than half of construction cost. Again, intent is for very long term appreciation of the asset, rather than a passive income source.

andrepd 5y ago
> Most homes are purchased for the purpose of living in them. [citation needed]
- dslkfjg 5y ago
  The number of people who buy homes to live in them greatly exceeds the number of people who buy homes as investments. That seems obvious to me. The only way most housing could be investment property is if investment vehicles each had so many houses, literally tens or hundreds of thousands, that their total ownership exceeded that of ordinary people . As it turns out, this is not the case: https://www.statista.com/statistics/187576/housing-units-occupied-by-owner-in-the-us-since-1975/ https://www.statista.com/statistics/187576/housing-units-occ...
  - pbhjpbhj 5y ago
    Perhaps the parent is suggesting that people might only buy because it's also an investment and would otherwise rent? FTSE100 appears to have doubled in 20 years, my house in a poor UK city has quadrupled in value. Starting wages have increased by about 70%.
- kumarvvr 5y ago
  I myself am an example, so is everyone in my social circle. edit: Also Myth 5 in the following article. https://economictimes.indiatimes.com/news/et-explains/six-myths-about-buying-a-home-in-india-you-need-to-stop-believing/articleshow/66553020.cms?from=mdr https://economictimes.indiatimes.com/news/et-explains/six-my... Edit 2: An 1800 sft, duplex house, built in a 150 square yard property, cost about Rs. 13 million. And that is in a city like Hyderabad. Costs about double that in Bangalore, the top IT city in India and probably more in a city like Mumbai & New Delhi. An average salary of an IT employee, with about 10 years of experience is about Rs. 3 million per year. Banks give a loan of about Rs. 10 million on that house, and employees usually source the remaining amount from further loans or high interest borrowings. Cumulatively, with current interest rates (have been stable for a decade now), EMI on a 13 million loan is about 0.13 million per month, meaning more than half of an employees salary, 1.56 million, goes to EMI payments. Average rental value for that property is about Rs. 25000 per month, or Rs. 0.3 million per year. So hardly enough for covering EMI. Tenure on the loan is usually 20 to 30 years. So, for most families, with wife and husband working, owning one house is within reach, but two is beyond capacity. With so much of income going to EMI, most choose to stay in the house rather than rent it out.