Renting while house hunting or building a home: Things to consider

Sumit is an IT professional from Delhi. After securing a dream job and deciding to move to Bangalore with his family, he sold his property without a house to move into. A few months later, he invested in a plot in Bangalore to build his dream home. The challenge Sumit faced was the burden of his home loan EMIs and the monthly rent for the apartment where he was residing with his family. There could be many people like Sumit who are navigating the home ownership journey with similar challenges. Every buyer’s homebuying journey is unique. For some, financial constraints or delays in property possession may compel them to find alternative accommodation options. In such a scenario, renting may be a suitable choice. In this article, we will explore the benefits and key considerations when renting a home while you are house hunting or constructing a house. 

How does renting help during house hunting or constructing your house?

Offers flexibility and convenience

Renting a home provides the home seeker with flexibility and convenience. Moving or relocating on short notice isn’t a problem. This is especially beneficial for working professionals. When one is unsure whether they want to stay in one place for the long term, renting may be a practical option. 

An affordable choice in an expensive location

Buying a house in an expensive city or a premium locality within a city can be difficult for some home seekers. For such people, renting is a better option. With increasing property values, home purchases tend to get costlier in cities. On the other hand, the rent amount one pays will be fixed, depending on the rental agreement. 

Saves from hasty buying decisions

Renting allows home seekers ample time to plan their house purchase. It provides them with the chance to live in different areas and explore different neighbourhoods. This enables them to better understand their housing needs and make the right choice when going for a long-term property investment. 

A necessity when waiting to move into a new house

Sometimes, home construction projects face delays due to factors such as inadequate planning and management, shortage of labour and materials, etc. Developers may also face regulatory or legal hurdles, which can extend the completion timeline of projects. In such scenarios, home seekers may have to live on rent. However, if one is building a house, they can consider staying in a rented property in a nearby area so they can visit the construction site when required. 

What are the rental options available to home seekers?

Short-term rentals 

Short-term rentals refer to furnished properties, such as vacation rentals or homestays. Such properties are available to rent for a period ranging from a few days to a few months. These rental options are popular among frequent business travellers and tourists. Short-term rental options may even include fully furnished apartments or individual rooms within a residential property. 

Long-term rentals 

Long-term rentals include the traditional style of renting apartments with a tenure of six months or more. For tenants, it provides stability unlike a short-term rental. If one has rented a home in a housing society, it comes with numerous advantages such as access to amenities, privacy and a sense of community. Other rental options available to home seekers include PGs and service apartments.

Tips for managing rent and home purchase costs

Owing to the growing employment opportunities in the metro and tier-2 cities, the demand for rented properties is increasing. For most salaried professionals, a significant portion of their monthly income is spent on paying rent and maintenance expenses. 

Servicing a home loan or saving for a down payment while living on rent can potentially elevate the financial strain for home seekers. However, one can adopt simple strategies to make this renting and home buying journey smooth: 

• Set a realistic budget: Before planning a home purchase or even renting a house, it is essential for the home seeker to assess their affordability. According to financial experts, the amount spent towards home loan EMIs should not exceed 40% of one’s net monthly income. Similarly, the monthly spending on rent should not be more than 30% of the income. These estimates are crucial for financial planning for potential home seekers.
• Adopt smart saving strategies: The journey to a smooth home purchase starts with prior planning. One can start by focusing on essential expenses, reducing unnecessary expenses and saving those funds for the down payment. Creating a dedicated savings account can greatly help lower the huge home purchase costs in future.
• Plan for additional income: As expenses are expected to rise, home seekers can explore ways to generate additional income. A popular option to generate significant funds is by liquidating assets such as jewellery, stocks or other investments. 
• Choose an affordable location to rent: When planning to rent till moving into a new house, home seekers can consider relocating to localities offering affordable options to rent. Another way to lower the burden of renting is to share the accommodation with a roommate. 

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Purchasing a house is a long, drawn-out process. It can take a few months to finally move into your dream house. Meanwhile, if you are staying on rent while planning a house purchase, it is crucial to start saving early. If you are already living in a house and are unable to manage the rent, consider downsizing. Moving into an apartment at a lower rent can help you save more money for the house purchase. If you are constructing your house, make sure to choose a project with a shorter completion time, say, four to six months. A lower waiting time for property possession implies a shorter rental tenure. 

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