"Buy Vs. Rent Index" by Makaan.com

Which is beneficial, buying a property or staying on rent? In the absence of a robust and reliable tool, these decisions were traditionally taken with gut feel or with the guidance of a close relative / friend, leaving scope for error. Makaan.com, India’s fastest growing real estate website from People Group has launched India’s first Buy vs. Rent Index. ChristenedMakaan.com Buy Vs Rent Index (MBRI) the tool aims to help property seekers make informed choice between buying and renting of property in top Indian cities / sub-cities.

The launch of MBRI follows the launch of hugely successful Makaan.com Property Index (MPI) which has been disseminating valuable information regarding the movement of residential property prices in key Indian cities for over a year. MBRI is yet another step to empower the property seeker with tools and intelligence that helps them take informed decision based on in-depth research.

MBRI, is a numerical value, arrived at after taking into account several factors including average capital value of property, average rental value, rental yield, historical capital price movement, historical rental movement and inflation. A low MBRI indicates that it is much less expensive to buy a home than to stay on rental whereas a high MBRI denotes that it is much more expensive to buy a home than to stay on rental. MBRI has been collated both at city and sub-city level.

Speaking on the initiative, Anupam Mittal, Founder & CEO, People Group says- ‘The MBRI is another step for Makaan.com towards becoming the trusted property marketplace for property seekers, agents, and developers.  Our mission of providing real-estate insight and intelligence has slowly become a reality and we hope to continue building upon the platform’.

 Speaking on the launch, Aditya Verma, COO Makaan.com says – ‘A property seeker today is confused between opting for a rented accommodation or giving that rental amount as the EMI for buying a house. MBRI will empower him with research based analysis. We have tried to present the finding in a manner that is easy to absorb and implement. We hope that seekers will benefit from this research’.

How to interpret MBRI? 

MBRI of 1-20: This denotes that it is much less expensive to buy a home than to stay on rental, in these cities / sub-cities. Property seekers looking at investing here are advised to buy a property than staying on rentals.

  

MBRI of 21-25: This denotes that it is relatively more expensive to buy a home than to stay on rental, in these cities / sub-cities. This is a neutral range and property seekers looking at investing here are advised to take the final decision based on their financial situation.

MBRI of 25+: This denotes that it is much more expensive to buy a home than to stay on rental, in these cities / sub-cities. Property seekers looking at investing here are advised to rent a property rather than buying.

MBRI analysis for top Indian Cities

The table and illustrations below explain what the MBRI is and how it is to be used. MBRI for key Indian real estate markets for the period October – December 2010 is given below

          

              MBRI OCT/DEC--2010

City/Subcity                            MBRI   Recommendation

Bangalore	20	BUY
Bangalore Central	27	RENT
Bangalore East	18	BUY
Bangalore North	19	BUY
Bangalore South	20	BUY
Bangalore West	16	BUY
Delhi	28	RENT
Delhi East	37	RENT
Delhi North	38	RENT
Delhi South	29	RENT
Delhi West	29	RENT
Dwarka	42	RENT
Faridabad	18	BAY
Ghaziabad	27	RENT
Greater Noida	25	NEUTRAL
Gurgaon	17	BUY
Noida	19	BUY
Hyderabad	21	NEUTRAL
Hyderabad	15	BUY
Secunderabad	28	RENT
Mumbai	25	NEUTRAL
Mumbai Andheri-Dahisar	24	NEUTRAL
Mumbai Beyond Thane	27	RENT
Mumbai Harbour	24	NEUTRAL
Mumbai Mira Road And Beyond	23	NEUTRAL
Mumbai Navi	25	NEUTRAL
Mumbai South	25	NEUTRAL
Mumbai South West	22	NEUTRAL
Mumbai Thane	27	NEUTRAL
Pune	24	NEUTRAL
Pune	24	NEUTRAL
Ahmedabad	18	BUY
Ahmedabad West	22	NEUTRAL
Ahmedabad East	15	BUY
Ahmedabad North	18	BUY
Chennai	16	BUY
Chennai South	16	BUY
Chennai North	18	BUY
Chennai Central	13	BUY

 Let’s look at the MBRI data for Chennai (16) and Ahmedabad (18) and compare that with MBRI for Mumbai (25) and Delhi (28). A lower MBRI for Chennai and Ahmedabad indicates that it is less expensive to buy a property here than to stay on rent. Let us take an example to understand the MBRI dynamics with-in a city, if you look at Delhi NCR, we find that MBRI for Gurgaon, Faridabad & Noida is 17, 18 & 19 respectively, indicating that property seekers will be better off buying a property in these sub-cities rather than staying on rent. This also indicates that the rentals in these sub-cities are higher when compared with the prevailing capital values. On the other hand, MBRI for Delhi East, Delhi North & Dwarka is 37, 38 & 42 respectively, indicating that one should prefer to stay on rent rather than buying a property here. High MBRI also indicate lower rental value when compared with the capital value of property. Similar interpretation can be drawn for other cities / sub-cities.

MBRI Methodology

     Coverage - Each city is divided in sub-cities (micro-markets) and micro-markets into localities. Prices of properties are obtained across micro-markets through listings on makaan.com as well as makaan.com’s nationwide sales force

·         Database - The current Index comes from 32 micro-markets across the above cities. The Index is based on minimum database size of 20,000 data points every month

·         New & Resale properties - The MBRI database includes a good representation of new as well as resale properties. Most reports on the property sector today are based on new developments, whereas actually new properties are relatively small % of the supply with resale being the majority of supply

·         Index algorithm - The Index is calculated quarter-on-quarter for each of the above cities & sub-cities. It is a derived index using an advanced algorithm which factors in the average value of properties available for sale and rent.

Selection of cities for MBRI

·         Coverage ------------------------------- The MBRI covers Ahmedabad, Bangalore, Chennai, Delhi/NCR, Hyderabad, Mumbai and Pune.Other cities may be added in subsequent issues. These cities account for over 80% of the Indian Real Estate market.

·         Factors that have been taken into consideration while selecting the cities:

Population – The real estate sector is dependent on the demand of houses, which in turn is dependent on the population. Populous and ever growing urban agglomerates like Mumbai and NCR have an ever growing demand for housing.

Economic Importance – Cities which are hubs of certain industries have constant influx immigrants from across the country, which also creates a strong demand for housing – beyond the needs of the resident populations – e.g. Bangalore, Pune. Hence such cities have also been included.    

MakaanIQ.com, is an initiative to provide information, intelligence and tools to help property seekers and real estate industry players take an informed property investment decision. MakaanIq.com is part of People Group, owners of Makaan.com, Shaadi.com, Fropper.com & Mauj Mobile. People Group has won many awards including Deloitte Technology Fast 500 Asia Pacific awards - 2007 and IT - People awards for excellence in information technology.